Special home loans still continue with banks

Recently, many banks have raised their BPLRs but teaser loans still continue to be provided by many banks and financial institutions. Along with soft interest rates, host of innovative schemes are being offered to attract customers, informed industry experts and bankers.

For instance, LIC Housing Finance has introduced variable EMI (equated monthly installment) product to target the young salaried class, who are planning to buy a house but cannot afford high EMI. The scheme offered by them would structure the repayments in such a way that EMIs remain low at the start of the loan and will increase as the loan period progresses. The scheme has been designed assuming that the repayment of capacity of the customer will increase as salaries increase.

The company is offering product at a floating interest rate of 8.75 per cent for loans up to Rs 1.5 crore.

RR Nair, managing director and chief executive officer of LIC Housing Finance points out, “This product is for the young salaried employees, who would like to own a big home but do not have the salary to match. There is a lot of scope to be innovative in the home loan market, as there are varied customers with a variety of needs.”


Punjab National Bank, a public sector lender is giving choice to the customers to extend even margin money payments over a period of time and is also offering home loans at a lower rate of interest.

Recently bank has launched a home loan festival bonanza, in which it has slashed interest rate to 8.50 per cent (fixed) on loans up to Rs 50 lakh for three years across all repayment tenures and has also waived off processing fees and documentation charges. Bank has also waived off prepayment charges.

Already HDFC and State Bank of India (SBI) are offering floated fixed/ floating rate products, under which fixed interest rate is offered for a specific period of time and then it will be reverted to floating rate of interest.

SBI has been doing good business in home loan segment as it is offering an invitation rate of 8 per cent, which is the lowest in the market.

LIC Housing Finance has also introduced a product in home loan segment called Advantage 5, in which it offers a fixed interest rate of 9.25 per cent for five years thereafter will be reverted to a floating rate.

More banks and home finance institutions are offering similar fixed-cum-floating rate products to attract customers.

Sumeet Vaid, chief executive officer of Financial Freedom, a financial planning company based in Mumbai says, “In a rising interest rate regime, it is beneficial for customers to get into a fixed loan scheme, so that the interest rate is protected for a short duration. Banks are looking at very aggressive strategies to win home loan customers.”