State Bank of India (SBI), the country's largest bank, is going all out to expand its retail home loan portfolio. According to a senior SBI official, the bank will allow existing borrowers to shift their home loan by waiving the third-party guarantor clause.
Typically, when buyers shift lenders, they have to provide a guarantor till the title deeds of the property can be pledged with the bank. This can be a headache as finding a third-party guarantor for a short period, one to two months, is difficult.
Most banks seek a guarantor for the interim period because during this time, the loan is "clean", without the backing of any collateral or security. According to the SBI official, this clause was proving a hindrance for many borrowers.
However, this clause is waived only for loans that have been serviced for two years.
In addition, SBI is offering loans for third homes at the same rate as regular home loans, added the official.
According to the Reserve Bank of India's (RBI) asset classification guidelines, a loan for a third home is classified as commercial real estate (CRE) and attracts a higher rate of provisioning at one per cent.
As against this, the provisioning for loans for the first and second home is at 0.4 per cent. This means, banks have to set aside more money when they lend for a third home.
Earlier, for CRE loans, SBI used to charge 25 basis points (bps), that is 10.25 per cent for loans up to Rs 30 lakh and 10.4 per cent for loans above Rs 30 lakh. Now, these loans, too, will be offered at 10 and 10.25 per cent, respectively.
In comparison, HDFC's rate of interest is 10.25 for loans up to Rs 30 lakh and 10.50 per cent for loans above Rs 30
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