Home loan EMIs
usually work out to about Rs. 1,000 per lakh of a loan availed for up to 20
years
Banks are now
lowering EMIs to Rs. 900 per lakh
or / even below by increasing tenure by
up to 10 years Experts say this will only win customers in the short term as
EMIs will have to go above Rs. 1,000 per lakh given the thin margins in the
business
Mr. Dewakar is
looking to shift his home loan to another bank or / housing finance company (HFC).
Currently, he pays an
equated monthly instalment (EMI) of Rs. 26,048 on a home loan of Rs. 22 lakh
which works out to Rs. 1,184 per lakh.
Many of lenders are
offering schemes at Rs. 900 per lakh or / slightly below. On the face of it, it
looks tempting as there would be a lower EMI outflow if I opt for Rs. 900 per
lakh as against Rs. 1,184 per lakh, which I am currently servicing. I am in
talks to get the best possible deal, he says.
Already, housing loan
rates are pegged to base rates (9.7% to 10.25 %) or / close to them. To boost business, lenders are
pitching EMIs below Rs. 1,000 for every lakh of rupees availed. The calculation
for monthly housing loan repayment has been roughly Rs. 1,000 for every lakh
for a loan availed for up to 20 years. Banks are now lowering EMIs to Rs. 900
per lakh or / even below by extending the tenure by up to 10 years.
Punjab National Bank
(PNB) has a scheme wherein the EMI is Rs. 926 per lakh on a loan of up to Rs.
75 lakh and a tenure of 25 years. Interest is pegged to the banks base rate of
10.25 %.
Through this, we are
looking to extend repayment tenure for the borrower up to 65 years or / even 70
years of age, a senior official of the bank said.
Similarly, under its
Bhagya Lakshmi housing scheme, LIC Housing Finance (LIC HFL) is offering Rs .
903 per lakh for a 30-year loan at 10.35%. Such schemes help bringing in fence
sitters (those who are deferring house purchase in anticipation of a real
estate price correction or / interest rate revision), said Mr. V. K. Sharma, Director
and Chief Executive, LIC HFL.
Average loan offtake
for the company is Rs. 17 lakh Rs. 18 lakh and repayment period usually ranges
from 15 to 20 years.
The move towards
longer tenures is a reflection of the confidence banks and HFCs have on borrowers.Gross
NPA (non performing assets) on housing loans for nationalized banks is 1.8 %
and for HFCs the figure stands at 0.44 %. Also, the average tenure of home
loans in India ranges from 7 to 10 years depending on the institution & credit offtake.
Besides, such schemes
are attractive from a balance transfer perspective as the new company is
getting a seasoned borrower in the first place.There are not much costs
involved in loan appraisal &
underwriting as the loan did not originate from the firm taking over and
all this results in an immediate growth of the balance sheet, said Mr. R V
Verma, Chairman and Managing Director, National Housing Bank (NHB), the apex
body for housing loan finance in India.
India's largest
lender, State Bank of India (SBI), also has a Rs. 874 per lakh scheme for 30
years at 9.95%. The banks housing loan business reported a year-on-year growth
of 18.4 % to Rs.1,24,772 crore in June 2013 as against Rs.1,05,383 crore a year
ago.
Others such as Dewan
Housing Finance Limited (DHFL) are also looking to introduce a lower EMI
scheme. We are contemplating on introducing a 30-year housing loan product to
help the customer avail of lower monthly outgo towards the housing loan, Mr.
Anoop Pabby, President, Strategic Initiatives, Dewan Housing Finance said.
However, some
industry observers say such marketing tactics can only provide short-term gains
in market share and that a calculation of Rs. 1,000-plus for every lakh of loan
availed would be the only sustainable level in the long run given that margins
in the home lending business are around 1% to 1.15 % currently. As of today,
incremental borrowing costs range from 9.5 % to 10.3 %.
At best, such schemes
help in taking over loans or / converting fence sitters into borrowers.
Ultimately, to prop up demand as well as business, we have to move to tier II
and tier III locations, Mr. Sharma said.
SRC: TOI
