Despite an increase in lending rates, most banks and home finance institutions have continued to offer special home loan products to expand their retail books. It is not just softer interest rates that customers are enjoying. There is also a host of innovative schemes to choose from, say industry experts and bankers.

For instance, LIC Housing Finance has a variable EMI (equated monthly installment) product targeted at the young salaried class. Punjab National Bank enables customers to have staggered payments even on margin money.

LIC Housing Finance offers a home loan product targeted at the young salaried customer who has a job, wants a house but cannot afford a high EMI.

The repayment will be structured so that EMIs remain low at the start of the loan and it increases as the loan period progresses. This is based on the assumption that the repayment capacity of the customer will rise as salaries go up.

The product is available at a floating interest rate of 8.75 per cent for loans of up to Rs 1.5 crore.

“This product is for the young salaried employees, who would like to own a big home but do not have the salary to match. There is a lot of scope to be innovative in the home loan market, as there are varied customers with a variety of needs,” said RR Nair, managing director and chief executive officer of LIC Housing Finance.

To capture new customers, PNB is relieving customers of the need for margin money and is also offering home loans at a lower rate of interest.

The bank recently announced a festival bonanza, slashing interest rate on home loans up to Rs 50 lakh to 8.50 per cent (fixed) for three years across all repayment tenures and waived off processing fees and documentation charges. The prepayment fee too has been waived.

“Banks and home finance institutions are offering a variety of products. Some banks have offered a step-up product, where EMIs increase as the loan progresses or a step-down product where EMIs decrease with the tenure of the load. Banks are even foregoing margin money requirements at the start of the loan and agreeing to staggered payments during the tenure of the loan,” said Satkam Divya, chief executive Officer of Rupee Times.

HDFC and State Bank of India (SBI) have floated fixed/floating rate products, which keep the interest rate fixed for a specified period of time and then revert to floating rate of interest.

SBI has seen a good offtake in the home loan being offered at an invitation rate of 8 per cent, which is the lowest in the market.

LIC Housing Finance also has a product, called Advantage 5, under which the lending rate is fixed at 9.25 per cent for five years and reverts to a floating rate thereafter.

Other banks and home finance institutions too are offering similar fixed-cum-floating rate products to lure customers.

“In a rising interest rate regime, it is beneficial for customers to get into a fixed loan scheme, so that the interest rate is protected for a short duration. Banks are looking at very aggressive strategies to win home loan customers,” said Sumeet Vaid, chief executive officer of Financial Freedom, a financial planning company based in Mumbai.

manjuab

@mydigitalfc.com