SBI low interest home loans: A move to promote affordable housing in India
With the Indian Government?s ?Housing for All by 2022? initiative, the affordable housing segment is witnessing significant growth in the past couple of years.
The housing segment is expected to become the next big growth driver for the Indian economy with over 30% growth rate predicted in the medium term.
To leverage the growing demand and to support the government?s aim to build about two crore houses across all urban locations over the next five years, State Bank of India?s SBI Home Loan division has been coming up with various initiatives that could help customers to fulfil their dream of having a own home.
What exactly is affordable housing?
Affordable housing, as the name suggests, is about housing units that are affordable by low or middle income households. Though different countries have different definitions for affordable housing the core concept is the same – to cater housing needs of that sections of society which are not able to purchase houses at market price.
In India, houses up to 30m? carpet area in four metros and 60m? carpet area in non-metros are defined as affordable housing units.
Increasing demand for affordable housing in India
According to private property advisory firm, Liases Foras, in the June quarter, the affordable housing segment, which primarily included houses below Rs. 25 lakh, constituted around 17% of overall housing sales in eight major cities.
SBI also reported that while majority of demand for its home loans usually comes from top cities, the demand from smaller cities such as Nagpur, Indore, Lucknow, Kanpur, Bhopal, Jaipur and Vizag is increasing with the increasing demand for affordable housing.
Government?s push for affordable housing
Launched in 2015, the Pradhan Mantri Awas Yojana or the ?Housing for All? mission for urban aims to provide assistance to implementing agencies through state government for providing houses to all eligible families by 2022.
It offers credit linked subsidy on home loans taken by eligible urban poor for the purchase or construction of a house. Currently, there are four schemes available under the affordable housing through credit linked subsidy scheme (CLSS).
- CLSS for Economically Weaker Section (EWS) and Low Income Group (LIG)
- Revised CLSS for EWS/LIG
- CLSS for middle income group-I (MIG-I)
- CLSS for MIG-II
Credit linked subsidy scheme for EWS/LIG Under the scheme, eligible beneficiaries in EWS/LIG category will be provided with a credit linked interest subsidy at 6.50% for 15 years or for the tenure of the loan. Government of India categorises EWS as households having an annual income up to Rs.3,00,000 lakh, while the LIG households are those with an annual income between Rs.3,00,000 lakh up to Rs.6,00,000 lakh. The scheme is valid from 17 June 2015 to 31 March 2022 and provides a maximum subsidy of approximately Rs. 2.20 lakh.
Revised CLSS for EWS/LIG The scheme is a revision to the above scheme. While all the guidelines stand the same, the maximum tenure of loan is increased from 15 to 20 years, along with the maximum subsidy to Rs. 2.67 lakhs.
CLSS for middle income group-I/II (MIG-I/II) Under the CLSS MIG-I, eligible beneficiaries will be provided with an interest subsidy of 4% for loan amount of up to Rs. 9,00,000 lakh. In MIG-II, it will be 3% interest subsidy for Rs. 12 lakh. The subsidy will be available for a tenure of 20 years or the actual tenure of the loan. Maximum subsidy under MIG-I is Rs. 2.35 lakh and for MIG-II it is Rs. 2.30 lakh.
2017 Union Budget ? schemes and incentives for affordable housing sector
To further promote the growth of affordable housing government introduced various schemes and incentives in the current year?s Union Budget, Affordable housing segment has given infrastructure status allowing developers to get cheaper sources of funding, including external commercial borrowings. The project deadline to develop affordable housing projects was extended to five years from the earlier three years. The criteria for affordable housing was relaxed to 30m? for metros and 60m? for non-metros on the carpet area, instead of the saleable area. Developers were given one year time to pay tax on rental income on completed but unsold units. To support all the schemes announced in the budget, a new CLSS for MIG was introduced with a provision of Rs. 1,000 crore.
SBI Home Loans initiatives to leverage the demand
The government?s schemes and incentives have been attracting both consumers and developers to move towards affordable housing. With more and more first time buyers planning to purchase houses, the demand for housing loans is also increasing at a rapid pace.
According to the Reserve Bank of India, housing loans up to Rs. 50 lakh for house value of up to Rs. 65 lakh located in six metros are defined as affordable housing loans. In non-metros, the loans up to Rs. 40 lakh for house value of up to Rs. 50 lakh.
To capitalise the current as well as the expected demand for housing loans and to support the government?s mission, SBI Home Loans, the prime lender in the country, has been gearing up with all possible initiatives.
Below is the compilation of the most recent initiatives SBI Home Loans has taken in a move to help the country progress towards affordable housing.
- SBI?s quick home loan processing – Following the recent merger of its five associate banks, SBI now has additional resources, which it would like to deploy in marketing and sales of its home loan products. In August, it made an announcement that it is deploying additional resources especially to process home loans along with adopting a quick approval process to meet the rising demand for affordable home loans.
- Dedicated real estate portal ? In July, the largest bank launched a dedicated real estate portal ?SBI Realty?, where home buyers can choose properties from its 3,000 approved projects across 13 states and Union Territories covering 30 cities in the country. Currently, there are 9.5 lakh homes available on the site for sale. Other features of the site include comparison of past and current price trends for properties in various localities, loan amount eligibility calculator, affordability calculator, EMI calculator, savings calculator with regards to balance transfer.
- Interest rate cuts in a row – In the months of June and May, SBI announced interest rate cuts on home loans in a row. In June, there was a 10 basis points interest rate cut to 8.55%, on the home loans above Rs. 75 lakh. Effective from 15 June, the revised rates are applicable for salaried women and for others the interest rate is 8.6%. During May, the interest rates on home loans below Rs. 30 lakh were cut by 0.25% to 8.35% and loans above Rs. 30 lakh by 0.01%. The revised rate of interest was the lowest in the market in the home loan segment.
- Collaboration with CREDAI ? To contribute to the progress of real estate sector towards affordable housing and green housing, SBI joined hands with the Confederation of Real Estate Developers Association of India (CREDAI) in April. During the three year contract period, SBI will acts as CREDAI?s national banking partner.
The bank will provide easy construction loans to CREDAI member developers for affordable housing projects at subsidised interest rates. Eligible developers will get an interest concession of up to 35bps for construction loans.
For consumers, SBI launched a new home loan product, ?SBI HamaraGhar? ? a home loan exclusively meant for affordable housing projects. Further, both SBI and CREDAI agreed on supporting green construction projects. The bank will provide an interest concession and processing fee waiver facility for loans taken for the construction of green projects under SBI Green Home Loans.
- Rs. 1800 crore loan to promote affordable housing ? In March, SBI received $274 million (Rs. 1800 crore) loan from German KfW Development Bank. With a maturity period of 15 years, the loan will be used to support government?s ?Housing for All? mission.
SBI in the affordable home loan segment
By the end of June 2017, SBI?s home loan book was at Rs. 2.88 trillion with 33% market share. For the fiscal year 2018, the bank is targeting 15% growth in the home loan category. Currently, SBI?s average home loan in Rs. 24 lakh and its home loan customer base is mainly comprised of salaried-first time home buyers. During the previous fiscal, out of the 270,000 home loans sanctioned, 170,000 were for the customers belonging to the lower income group as defined by PMAY.
SBI Hamara Ghar ? SBI?s Home Loan for affordable housing segment
SBI Hamara Ghar is a home loan product designed to cater the requirements of affordable segment customers. The loan comes up with low interest rate and has fixed interest rate for the first two years. A loan amount of up to Rs. 30 lakh can be availed under the product.
- Features: Other features of the home loan include low processing fee, no hidden charges, interest charged on daily reducing balance and longest tenure of 30 years. A pre-payment penalty will be charged if the loan is pre-closed before the initial two year period.
- Eligibility: The eligibility for availing Hamara Ghar loan mandates the applicant to be a resident of India, above 18 years of age and below 70 years.
- Interest rate: The interest charged for a loan amount of up to Rs. 30 lakh is ? – 8.50% per annum for women for first two years and for the rest of the tenure the interest will be linked to prevailing one year MCLR (marginal cost of fund based lending rate) – For others, the rate of interest is 8.55% per annum for the first two years and for the rest of the tenure it will be linked to prevailing one year MCLR.
- Processing fee: The processing fee is 0.35% of the loan amount, with a minimum fee of Rs. 2,000 and maximum of Rs. 10,000. Also charged are the pre-sanction and the post-sanction fees along with applicable taxes.
- Documents required: To avail Hamara Ghar loan, the applicant needs to submit:
- A completed loan application with three passport size photographs
- Proof of identity
- Proof of residence
- Construction permit (if applicable)
- Registered sale agreement
- Occupancy certificate (if the property is ready to move)
- Approved plan copy and registered development agreement of the builder, conveyance deed, in case of new property
- Payment receipts to the builder
- Last six months bank account statement
- Loan account statement for last one year (if any previous loans)
- Current salary slip or certificate and copy of Form 16 for last two years (for salaried applicants)
- For non-salaried: IT returns for last three years, balance sheet and profit & loss account for last three years, business license details, TDS certificate, certificate of qualification (in case of professionals like CAs, Doctors)
Other popular SBI Home Loan products
Besides the new entrant, SBI also offers a variety of home loan products with attractive features and offers. They include ?
- SBI Regular Home Loan
- Balance Transfer to Home Loan
- NRI Home Loan
- Flexipay Home Loan
- Privilege Home Loan
- Shaurya Home Loan
- Pre-approved Home Loan
- Home Top up Loan
- Bridge Home Loan
The home loan products include home purchase loan, improvement loan, construction loan, home extension loan, land purchase loan, home conversion loan, balance transfer loan, NRI home loans and loan against property.