High home loan demand triggers interest rate war – ET RealEstate

̥MUMBAI: A surge in demand for home loans in October has triggered a rate war. Kotak Bank is now offering home loans at 6.75% — the second reduction in less than a month. A host of banks are offering loans at 6.8% to 7%, resulting in the spread between these and government bonds narrowing down to 80 basis points (100bps = 1 percentage point).

Banks say that home loans are a safe bet and this is the only segment growing in double digits. Demand has been triggered because of work from home (WFH) needs, discounts by builders, reduction in stamp duty rates and interest rates being at an all-time low. The frequent changes in pricing among lenders seem to indicate that a rate war is brewing as the banks compete to grow the home loan book, which is seen as the safest category of loans.

In the last few days, Bank of Baroda and Union Bank of India had slashed their home loans to 6.8% and 6.9%. SBI recently announced discounts of up to 25bps on loans above Rs 75 lakh for customers applying from its app Yono. HDFC also offers loans at 6.9%.

Speaking to TOI, Kotak Bank group president (consumer banking) Shanti Ekambaram said that the lender was seeing an increase in demand for housing as the shift to WFH had resulted in homeowners looking for larger accommodation. Also, developers and state governments were offering additional incentives to home buyers.

“We are seeing demand back at pre-Covid levels and we want to open our doors to home loan customers as part of our acquisition strategy for long-term customers,” she said. According to Ekambaram, home loans were the best asset class, and offering the lowest rate enabled the bank to attract top quality customers.

While announcing the results, Punjab National Bank MD & CEO S S Mallikarjuna Rao said that home loans have gained momentum and are heading to pre-Covid levels. Home loans have been a major driver of credit, growing nearly 10% on a year-on-year basis to Rs 84,000 crore.
High home loan demand triggers interest rate warFor HDFC, home loan disbursements in October 2020 have been the second-highest in any month in the institution’s history. Mumbai saw the highest demand followed by Delhi and Bengaluru, while Hyderabad and Chennai were a bit slow. “The demand that we are seeing is largely transactions that were initiated post-Covid and is not pent-up demand. We hope that this will be sustained,” said HDFC VC and CEO Keki Mistry.

Ekambaram says that the renewed demand for housing is an opportunity for Kotak Bank, which was not part of the top-five home loan lenders. The bank now offers home loans at 6.75% for salaried borrowers with a Cibil score of over 750 and loan-to-value of 80% and below. For self-employed borrowers, the rate is 6.85%, all other conditions being similar. The same rates will be available for borrowers seeking balance transfers.



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SBI offers up to two years repayment relief for home & retail loans – ET RealEstate

MUMBAI: State Bank of India will provide relief to home and retail loan borrowers impacted by Covid-19 in the form of either a moratorium of up to 24 months or by rescheduling instalments and extending the tenure by a period equivalent to the moratorium granted.

The moratorium period can be extended by a maximum of 2 years, India’s largest lender said Monday, setting the tone for other banks, specially PSU players.

In line with RBI’s one-time relief, the scheme is available to borrowers who had availed of a home loan before March 1, 2020 and were regular in repayments until the Covid-19 lockdown.

But the borrowers will have to demonstrate that their income has been hit because of the pandemic.

“For the purpose of restructuring, the bank will depend entirely on the customer’s assessment of when they expect their income to be normalised or to get employed,” said SBI managing director C S Setty said while announcing the scheme.

The country’s largest lender has been the first to roll out a protocol for restructuring loans of retail borrowers who were affected by Covid-19. Other lenders including HDFC and ICICI Bank are expected to follow suit before the end of the month.

To facilitate borrowers to understand their eligibility for restructuring, SBI has launched an online portal to enable borrowers check their eligibility for all retail loans. This includes home, education, auto, and other personal loans.

The restructuring will give breathing space for a borrower until their income is normalised or they get re-employed. Also, they will not be classified as defaulters or non-performing assets. The downside is that the bank will charge 35 basis points extra as interest since the RBI needs them to set aside additional provisions for these loans. This means that despite initial relief over the tenure of the loan, the borrower will end up paying more than on a regular loan without restructuring.
SBI offers up to two years repayment relief for home & retail loans“We have put in place a scheme for restructuring and it is available to borrowers through our internal portal. We have also intimated borrowers but don’t expect much of traction for restructuring given the inquiries,” said Rajkiran Rai, MD & CEO, Union Bank of India.

HDFC Bank has put in place a facility to submit online applications. The bank has said that it will report the loan to the credit bureau as ‘restructured’ and as per norms, all loans availed will be classified as restructured even if only one loan is being restructured.

“The dues for the moratorium period can be capitalised. Or else it will be very strenuous for the borrower to repay. Capitalising the dues will reduce the pressure on the borrower and we are also working on this by elongating the term of the loan,” said Siddhartha Mohanty, MD & CEO, LIC Housing Finance. He added that even if the loan term is extended, typically home loan borrowers end up pre-paying their loans by seven to ten years.

Borrowers who access SBI’s portal for restructuring will still have to visit the branch as a ‘wet signature’ is required for the loan document to be reworked. The portal will however take care of all the queries of the borrower. “It is not an end-to-end process but it will reduce the need for customers to visit branches especially during this time of Covid,” said Setty.



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Banks plan EMI deferment for home loan restructuring – ET RealEstate

MUMBAI: Lenders, including SBI, are working on restructuring options for home loans where the overall tenure of the loan does not extend by more than two years, even after relaxing the repayment schedule.

The options include allowing EMI deferment for a few months in cases where the borrower has suffered total loss of income or allowing step-up EMIs, with a lower payout for a couple of years to make up for a reduction in salary or loss of income due to the pandemic.

According to sources, the KV Kamath committee will not look into retail and home loan restructuring and banks will draw up their own proposal which they will submit to their boards by early next month after getting an idea of the number of borrowers facing stress.

Bankers are keen to restructure loans in order to avoid having to classify defaulters as non-performing assets. Also, banks say this isn’t the right time to enforce security and attach assets. Though RBI has let banks extend loan tenure by two years, bankers say that they cannot provide a two-year moratorium.

Anyone with a 15-year loan who has availed moratorium for six months will already see their overall loan tenure extend by 14 months. This means that at most banks can defer EMI by a few months. The exact relaxation would depend on the interest rate that the borrower will be paying. While home loan rates have come down to below 7%, banks say that it will be difficult to provide their best rates to restructured loans as lenders have to make an additional provision of 10% on restructured loans. This will increase costs by up to 30 basis points.

According to the terms of reference of RBI’s appointment the Kamath committee is expected to submit its report by mid-September. Bankers expect the committee to give various parameters for restructuring including the maximum debt-equity ratio to be allowed, the permissible leverage for each sector like hospitality, aviation, real estate, or construction.

The committee would also decide under what circumstances can conversion of debt to equity would be allowed. In addition, every individual corporate loan, where bank exposure is over Rs 1,500 crore would be reviewed by the committee to consider restructuring.



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Chennai: 1,000 buyers in fix as SBI puts clubhouse they paid for on the block – ET RealEstate

CHENNAI: Around 1,000 residents of an apartment complex in Thirumudivakkam in the southern suburbs are in a spot, with State Bank of India putting up a club house on the premises for auction over a mortgage default.

The residents paid Rs 1 lakh-Rs 1.5 lakh each for developing the club house as a common property, but, the fine-print of the agreement with the builder showed the property was owned by him. He later mortgaged it against a loan with the bank which decided to hold the auction on August 28 after he defaulted on payments.

A Moorthy, president of the residents association, said most flat owners were senior citizens who paid a sizeable sum for the ‘Royal Club’. “The builder took funds from us saying it was for construction of the club house, but we did not get ownership. We don’t know what to do now,” said the 62-year-old.

While the builder couldn’t be reached for comment, the association’s complaint to SBI hasn’t got a response. TOI also studied documents related to the case.

P Balaji, counsel for the residents, said the builder, while selling the flats, insisted on payment of membership fee for the club house. “They got an estimate sheet, promising 22sqft to each resident. But, the residents did not check the agreement which clearly mentioned the builder was owner of the clubhouse,” Balaji said.

Now, despite the property being auctioned, the residents can’t claim money from the auctioned sum. “We can only prefer a criminal complaint,” Balaji said.

Legal experts who vetted the documents said the residents could file individual suits for compensation, but that such cases could drag on for years.



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