It has been a common scenario for several home loan borrowers in the past where they have taken loans for under construction properties, only to be left in the lurch. Several home loan borrowers have faced a situation where they have had to start repaying home loans without even being able to get delivery of their apartments from their builders. This is why several home loan offerings have been specifically tailored to reassure these borrowers who are opting for properties in under-construction projects courtesy top lenders like LIC (Life Insurance Corporation of India) and SBI (State Bank of India).
For example, based on the new scheme unveiled by SBI, namely the RBFBG (Residential Builder Finance with Buyer Guarantee) scheme, the bank will be refunding the principal loan amount to the home loan customer in case the real estate developer fails to finish the project in question. LICHF or LIC Housing Finance has also unveiled a similar scheme named Pay When You Stay where customers get ample flexibility in terms of not paying the principal component of the home loan up to 4 years in case of under construction properties. These types of home loans will work wonders in assuaging confidence of prospective home buyers to choose under construction properties instead of settling for only ready to move units. In fact, as a result of these schemes being offered in the market, there has been a revival of home loan volumes for under construction properties throughout the country.
SBI tastes success with RBFPG scheme
State Bank of India (SBI) has already tasted success with its RBFPG scheme or the Residential Builder Finance with Buyer Guarantee. This scheme is already giving more confidence to home buyers to avail of home loans for under construction apartments and homes. This scheme is only applicable for under construction units where the whole project has received funding from State Bank of India (SBI). This indicates that these are projects in which SBI has already assessed the credibility of the real estate developer for all financial risks and it is the sole lender for the same.
SBI will be initiating a refund in case the real estate developer is unable to complete project work by the given possession date. The bank will be offering a grace period of 6 months as the maximum limit from the possession date to the real estate developer for completion of the project. In case the developer still fails to adhere to the agreement, the home loan borrower will be getting back the amount paid as principal for the home loan via his/her EMI. There will be no extra cost borne by the home buyer in this home loan scheme. The developer is the direct beneficiary of the home loan that is sanctioned by your bank and you need not pay the actual EMI until the home gets ready for possession/delivery. The developer is liable to pay the interest on the principal loan amount until the buyer receives possession.
This has become hugely comfortable for home loan borrowers since they do not have to pay higher EMIs on the home loan while they are already paying monthly rentals and waiting for the completion of their apartments. The agreement between the developer and lender entails a separate procedure where there are specific conditions in place. In most cases, the bank will disburse the loan amount on the basis of the progress of construction on the project. The RBFPG home loan scheme is currently available in major Indian cities including the NCR (National Capital Region), MMR (Mumbai Metropolitan Region), Pune, Hyderabad, Bangalore, Chennai and Kolkata.
Decoding the Pay when you stay scheme from LIC
Whenever a borrower obtains a home loan for a property under construction, usually there is a moratorium period of up to 3 years given by the lender, during which time frame, the borrower only has to pay the interest portion of the loan. A moratorium period of three years takes into account the fact that during this time frame, construction of the home has been completed and hence home loan borrowers can pay interest and the principal components via EMIs. However, in case of construction being delayed beyond the moratorium period, the borrower will end up paying both interest and principal components of the home loan.
The Pay when you stay scheme from LIC extends this moratorium period to 4 years for home loan borrowers or 48 months. In this time frame, borrowers do not have to repay the principal component of the home loan. However, they will have to repay the interest that is charged, which will be worked out on the basis of the amount that has been disbursed by the lender to the real estate developer. Upon getting possession, the regular EMIs will commence, wherein the principal amount will be charged by the lender along with interest. This product will benefit those borrowers who are purchasing properties in the list of approved projects of the lender and are currently staying in rented accommodation until they receive possession of their apartments. The minimum home loan amount that can be availed under this scheme is Rs. 20 lakh and the maximum amount is Rs. 2 crore.