India's Home Loan Growth Story
Almost four decades ago, home loans were not even an option for homebuyers. Infact, homebuyers were cautious to test this ground due to the social structure they belonged to, other finance modes they depended on and the age at which they decided to buy homes. Today, in times when the younger generation is making a choice of buying a home, thanks to the better-paying jobs, equated monthly installments do not scare them anymore. The repayment capacity of those in their late 20s and into their 30s is, on the whole, better than that of the previous generation.
A look back
Three renowned banks are often credited with what has today emerged as a robust borrowing-lending market. When it started offering home loans four decades ago, HDFC Bank had almost no competitor as housing was seen as an unproductive sector and did not receive the focus as it does today. Soon after, it was the ICICI Bank in 1999 that revolutionised the entire system by introducing floating home loan rates. This was an instant hit among prospective homebuyers. The State Bank of India (SBI) took a long time to gain ground in terms of home loan, but, when it did, it became popular in no time. The bank introduced fixed rate of eight per cent in the first year, nine per cent in the next two years and market rates for the rest of the term. The bank termed this as a teaser rate.
Many other banks which did not have the capacity to lend at attractive rates began rolling out other offers such as home improvement rates which meant there was a higher loan-to-value. But, the Reserve Bank of India (RBI) soon capped such limits at 80 per cent and banks were not allowed to fund stamp duty and registration charges.
Current scenario
Today, borrowing over 80 per cent of the value of a property is quite common, and more and more homebuyers prefer home loans. It also gives the homebuyers an assurance about the property they are planning to invest in as banks perform due diligence of the property before lending. However, it was not the same earlier. The home loan segment has come a long way since its inception decades ago. PropGuide traces this eventful journey.
Here are certain characteristics of the current loan market:
Defaults on the rise
The number of home loan defaults by individuals have marginally increased, indicates a report by TransUnion Cibil (TUCIBIL). Deliquincies were higher among those borrowing from the public sector banks and housing finance companies although it is not yet established that defaults in repaying private banks is not uncommon given that these banks have voluminous disbursements, CEO of TUCIBIL, Harshala Chandorkar was reported saying.
Much younger takers
If you look at those borrowing for two-wheelers, four-wheelers and homes, a study by the Boston Consulting Group (BCG) suggests that 40 per cent of borrowers are under the age of 35 years. In 2013, they formed only 24 per cent of the total borrowing population. The under-25 age group also forms nine per cent of the borrowing population.
NBFC's shining
Unlike banks that have been directed by RBI not to give loan for stamp duty and registration charges, the non-banking finance companies or the NBFCs are not under any such restriction. The BGG report suggested that between 2014 and 2017, the share of the NBFCs in total loans is estimated to have increased from 21 per cent to 44 per cent, while public sector banks took a beating as their share fell from 49 per cent to 28 per cent.
Lack of focus on informal housing
India is battling affordable housing crisis for which the Centre has launched the ambitious Housing For All by 2022 Mission. However, the experts point out that there can be no respite unless housing finance for those employed in informal sectors is announced. This sector makes up for 96 per cent of the housing shortage and there is every need to go beyond the traditional way of disbursing housing finance where documentation and technology are supreme. However, documents and technology does not come easy for the economically weaker sections.
You may want to read: What Is Hampering Progress Of Housing For All Mission?
Cheap home loan at 8.25 per cent
As of mid-November 2017, Dena Bank was offering the cheapest home loan at 8.25 per cent replacing the leader, the SBI, which had cut down rates, was offering at 8.30 per cent. This is valid till December 31, 2017 as part of the bank's retail loan carnival. There would be no documentation and processing fee during this period.
Considering a house? Check out the home loan rates of various banks:
Bank Name | Floating Interest rate | Per lac EMI | MCLR Rates | Processing Fee | |||||
SBI - State Bank Of India | 8.30% - 8.60% | Rs.855 - Rs.874 | 7.95% | 0.35% of Loan Amount or Rs 10000 plus service tax whichever is less, subject to minimum of Rs 2000 plus taxes | |||||
ICICI Bank | 8.35% - 8.80% | Rs.858 - Rs.886 | 8.20% | 0.50% - 1.00% of the loan amount or Rs. 1500/- (Rs. 2000/- for Mumbai, Delhi & Bangalore), whichever is higher + applicable Service Tax & Surcharge | |||||
HDFC Ltd | 8.35% - 8.55% | Rs.858 - Rs.871 | 16.15% | Up to 1.25% of the loan amount or ₹ 3,000 whichever is higher, plus applicable taxes | |||||
LIC Housing | 8.35% - 8.80% | Rs.858 - Rs.886 | 8.15% | Upto 1 crore - 5000 + Service Tax | |||||
Bank of Baroda | 8.35% - 8.55% | Rs.858 - Rs.871 | 8.35% | Upto Rs.50 lacs 0.5 % of loan amount (min Rs.7500 & Rs.12500) + service tax | |||||
AXIS Bank | 8.35% - 8.75% | Rs.858 - Rs.884 | 8.15% | Up to 1% of the Loan amount subject to minimum of Rs.10,000/- | |||||
DHFL | 8.35% | Rs.858 | Rs.5,000 to Rs.20000 + document charges + Service Tax | ||||||
IDBI | 8.35% - 8.40% | Rs.858 - Rs.861 | 8.80% | NIL | |||||
Union Bank of India | 8.75% - 8.80% | Rs.884 - Rs.887 | 8.50% | N.A | |||||
Bank of India | 8.55% - 8.60% | Rs.871 - Rs.874 | 8.50% | 0.25% of loan amount Min.Rs.1,000 and Max. Rs.20,000/- | |||||
Indiabulls Housing Finance Limited | 8.35% - 8.80% | Rs.858 - Rs.886 | Upto 28 lacs = Rs.7500 - Rs.10000 | ||||||
Corporation Bank | 8.85% | Rs.890 | 8.75% | 100% waiver under Festival Offer- 2016 (till 31-01-2017) | |||||
L&T Housing Finance | 9.65% - 10.25% (for Salaried/ SEP) 9.65%-10.50%(SENP) | Rs.942 - Rs.982 (for Salaried/ SEP) Rs.942 - Rs.998(SENP) | 0.25% -1%OR Rs.10000 which ever is higher +ST, subject to customer profile | ||||||
United Bank of India | 8.80% | Rs.887 | 8.80% | N.A | |||||
Tata capital Housing Finance ltd | 8.65%(For Women) - 8.90%(For Others) | Rs.877(For Women) - Rs.893(For Others) | 0.20% - 0.25% of the loan amount + Service tax | ||||||
Shubham Housing Development Finance Company | 12%-14%(For Salaried) - 15%-17%(For Self-employed) | Rs.1101-Rs.1244(For Salaried) - Rs.1317-Rs.1466(For Self-employed) | Upto 3 Lacs - Rs 9500 + ST | ||||||
HSBC Bank | 8.85% | Rs.890 | 8.00% | 1% of the loan amount applied for, subject to a minimum of Rs 10000 plus service tax. This fee is payable on application and is not refundable | |||||
Indian Bank | 8.60% | Rs.874 | 8.60% | 0.25% of loan amount with a maximum of Rs.20,000 | |||||
Deutsche Bank | 10.50% | Rs.998 | 9.35% | 12000 + Service Tax | |||||
Standard Chartered | 8.51% | Rs.868 | 8.95% | 10,000 plus applicable taxes | |||||
Federal Bank | 9.57% - 9.82% | Rs.937 - Rs.953 | 8.95% | 0.50% of the limit sanctioned with a minimum of 3,000+ST, maximum of 7,500+ST | |||||
Allahabad Bank | 8.55% - 8.65% | Rs.871 - Rs.877 | 8.60% | NIL | |||||
Central Bank of India | 8.30% | Rs.855 | 8.30% | Nil till 31.12.2017 | |||||
UCO Bank | 8.75% - 8.90% | Rs.884 - Rs.893 | 8.60% | Nil (till 31.12.2016) | |||||
Canara Bank | 8.65% - 8.75% | Rs.877 - Rs.884 | 8.45% | Waived till 26.01.2017 | |||||
Kotak Bank | 8.75% | Rs.884 | 8.85% | Zero | |||||
Dena Bank | 8.55% - 8.80% | Rs.871 - Rs.886 | 8.60% | 0.50% of sanctioned limit | |||||
Vijaya Bank | 8.90% | Rs.893 | 8.65% | N.A | |||||
Syndicate Bank | 8.75% | Rs.884 | 8.75% | Min. Rs.500/- & Maximum up to Rs.5000/- | |||||
Citibank | 8.60% - 8.85% | Rs.874 - Rs.890 | 8.05% | Rs. 5000 (Application fee) | |||||
PNB Housing Finance | 8.35% - 9.25% | Rs.858 - Rs.916 | 0.50% Or 10,000 + GST , whichever is higher. | ||||||
Oriental Bank of Commerce | 8.60% - 8.70% | Rs.874 - Rs.881 | 8.60% | NIL | |||||
8.65% - 8.90% | Rs.877 - Rs.893 | 8.65% | A flat rate of 0.58% of the loan amount- maximum of Rs. 10,190/- There is no hidden charge. This is subject to change from time to time without prior intimation. | ||||||
Punjab National Bank | 8.65% - 8.75% | Rs.877 - Rs.884 | 8.45% | NIL | |||||
Development Credit Bank | 10.60% | Rs.1005 | 9.98% | 1% | |||||
State Bank of Travancore | 9.20% - 9.45% | Rs.913 - Rs.929 | 9.60% | upto Rs.25,000 - Nil | |||||
Bank of Maharastra | 8.75% - 8.85% | Rs.884 - Rs.890 | 8.75% | 0.25% of the loan amount (subject to maximum of Rs.25000/-) | |||||
Dhanalakshmi Bank | 10.35% - 10.60% | Rs.988 - Rs.1005 | 10.10% | 1.00 % of loan amount + service tax (subject to minimum of Rs. 10,000 + service tax) | |||||
Andhra Bank | 9.50% - 9.70% | Rs.932 - Rs.945 | 8.65% | 0.50% of the loan amount or maximum of Rs.10,000 + service tax | |||||
DHFL Vyasa Housing Finance | 9.75% - 10.25% | Rs.945 - Rs.982 | 1% of the loan amount | ||||||
GIC Housing Finance | 10.25% | Rs.982 | Rs.2500 + service tax | ||||||
Gruh Finance Limited | 9.75% - 15.25% | Rs.949 - Rs.1335 | Up to 1% of the loan amount | ||||||
India Infoline Housing Finance Ltd. | 9.55% - 10.50% | Rs.935 - Rs.998 | Up to 1% of the home loan | ||||||
Karnataka Bank | 9.50% - 9.75% | Rs.932 - Rs.949 | 8.15% | 0.25% with a minimum of Rs.250 | |||||
Sundaram BNP Paribas Home Finance Ltd. | 9.80% - 11.05% | Rs.952 - Rs.1036 | Up to 0.75% of the loan amount or maximum of Rs.5,000 + taxes | ||||||
National Trust Housing Finance Ltd. | 14% - 16.50% | Rs.1244 - Rs.1429 | 2% of the loan amount or maximum of Rs.5,000 + taxes | ||||||
Orange City Housing Ltd. | 14% | Rs.1244 | 1% of the loan amount + taxes | ||||||
Reliance Home Finance Private Ltd. | 10.60% | Rs.1005 | 1% of the loan amount + taxes | ||||||
Repco Home Finance Ltd. | 9.60% | Rs.939 | Up to 1% of the loan amount + taxes | ||||||
Source: Deals4loans
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