NHB to Permit Home Loan Borrowers to Bring in Just 10% as Upfront Payment..!

The decision of National Housing Bank (NHB) to permit housing loan borrowers to bring in just 10% as upfront payment for availing loan above Rs. 20 lakh is expected to give a boost to big ticket loans.

The rider put by NHB that such loans should have a mortgage guarantee cover from a registered company is not expected to be a deterrent as the Housing Finance Companies (HFCs) themselves would have tie-ups with mortgage provider for extending the cover.

An amendment posted on NHB Web site on October 15, 2014 by Mr. Mohammad Mustafa, Chairman and Managing Director, NHB, stated that individual housing loans higher than Rs. 20 lakh could be granted by a HFC with higher loan to value (LTV) ratio not exceeding 90%. But such a loan should be guaranteed by a mortgage guarantee company that was registered with the RBI, "subject to the excess over the prescribed limit not exceeding the extent of the mortgage guarantee cover of such loan''.

Under earlier rule, the borrowers had to bring in 10% for loans up to Rs. 20 lakh, 20% for loans over Rs. 20 lakh to Rs. 75 lakh and 25% for loans beyond Rs. 75 lakh.

This has now been rationalised & for all loans, the minimum upfront payment by the beneficiaries is 10%. However, this comes with a stipulation that for loans higher than Rs. 20 lakh, there should be a mortgage guarantee cover given by an authorised agency. (India Mortgage Guarantee Corporation is the only registered mortgage guarantee company at present).

This move by the regulator NHB has brought in uniformity for all customers to get housing loans up to 90%, subject to their being eligible. This is a welcome move which will certainly benefit those borrowers who find it difficult to contribute 20% to 25% of the cost from their own sources.

The Indian home loan industry grew from Rs. 43,851 crore in March 2000 to Rs. 7,47,911 crore as on March 2013, showing a growth of 1606%. The mortgage to GDP ratio stands at 8% in India as on May 2014. It was among the lowest in the world & provides a huge opportunity for growth on a sustainable basis.

National Housing Bank

Core 5-A, India Habitat Centre,

Lodhi Road, New Delhi-110003

(PBX) 011 - 2464 9031 - 35

Fax : 011-2464 9030

E-mail: ho@nhb.org.in

http://www.nhb.org.in

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