The Reserve Bank of India (RBI) has been striving to make home loans more accessible and attractive for prospective home buyers. It has already cut the repo rate several times in succession while banks like SBI (State Bank of India), the country’s biggest bank, has also reduced its MCLR rates thereafter. It has also come up with a repo-rate linked home loan product for customers.
Now, the SBI has come up with a unique offering for home buyers which is sure to instill loads of confidence in them while also helping realty developers rack up higher sales volumes in the near future.
SBI confirms buyer refund in case the builder delays the project
SBI (State Bank of India) has already launched this home loan scheme where the principal amount is guaranteed in case the developer/builder does not complete the project within the given time-frame. The Chairman at SBI, Rajnish Kumar, has already stated that this scheme will apply for apartments where SBI is the only lender and this will boost the real estate sector greatly since it is facing several headwinds for some months now while also enhancing the confidence of home buyers. He added that these loans will be offered at the same interest rates as current home loans.
Borrowers will be able to ask for refunds in case the builder does not meet the stipulated deadline under RERA (Real Estate Regulation and Development Act). All developers are now required by law to register their projects under RERA and specify a final timeline for completion of the same. SBI was not too keen on direct lending to real estate developers in the past. As per reports, the bank will have overall exposure to commercial and residential real estate loans of just under Rs. 5,000 crore which represents only 0.2% of the Rs. 22.48 trillion loan book at the bank as of the September quarter. The RBI has directed banks to keep more money aside as standard asset provision of 0.75-1% for these particular loans. Banks usually have to keep 0.4% of money aside as provisions in case of other loans.
Other key aspects that you need to know about
SBI has clarified that a majority of loans sanctioned in this scheme will cater to the affordable housing category with home prices up to Rs. 2.5 crore across 7 cities in the country. It will then extend to 10 cities in the country. SBI has already tied up with Sunteck Realty Limited under this scheme and will steadily expand the same to other real estate developers who fulfill the given criteria for due diligence for loans of anywhere between Rs. 50-400 crore. It has tied up with the builder for three ongoing real estate projects in the MMR (Mumbai Metropolitan Region). The SBI Chairman has opined that this scheme will have a major role to play in scaling up home sales throughout the country. SBI has already slashed lending rates tied to the repo rate of the RBI by another 25 basis points, taking them to 7.8%. In December 2019, SBI reduced its 1-year MCLR to 7.9%, indicating a drop of 10 basis points.
This loan scheme will be financially safeguarding home buyers against possibilities of non-completion of real estate projects by builders. The product is named RBBG or Residential Builder Finance with Buyer Guarantee. The Chairman has already stated that the bank is committing to offer a guarantee to buyers taking loans from it until the time that the project gets its occupation certificate (OC). This will be a positive development for all parties, namely the bank, developers and prospective home buyers. In case a buyer books an apartment for Rs. 2 crore and has paid a sum of Rs. 1 crore till now, the bank will be refunding Rs. 1 crore. The term of the guarantee will be tied to the receipt of the OC according to the Chairman.
Additionally, for combating risks, SBI will be regularly tracking the progress of real estate projects and will look to ensure timely completion in order to avoid paying refunds as per experts. This will naturally ensure better accountability on part of developers while assuring home buyers of greater security as far as their investments are concerned. All in all, this unique SBI home loan scheme should be a much-needed booster dose for Indian real estate.