Will allow increase in loan amount, extension of repayment period
Bureau | MUMBAI, AUG 26, 2015 | Hindu Business Line
ICICI Bank, India’s largest private sector bank, has launched the country’s first Mortgage Guarantee-backed home loans for first-time borrowers in the affordable housing segment.
‘ICICI Bank Extraa Home Loans’ will allow a borrower to increase the loan amount by up to 20 per cent of the original amount, and also gives the option to extend the repayment period up to 67 years of age.
This increase in loan amount and tenure will come at a premium — an upfront fee of 1-2 per cent of the entire loan amount, including the incremental component.
“The fee will depend on the age of the borrower, extension in tenure, the nature of income — whether salaried or self-employed — and the loan-to-value ratio,” said Rajiv Sabharwal, Executive Director, ICICI Bank.
The facility will be suitable to largely middle-aged, salaried and self-employed individuals with seasonal income, seeking home loans of a maximum amount of ₹75 lakh.
Such loans will be available in four cities, Greater Mumbai, the National Capital Region, Bengaluru and Surat.
ICICI Bank has launched this initiative in association with India Mortgage Guarantee Corporation (IMGC), which will guarantee the incremental risk on default, Sabharwal said, adding that such products are popular in the US and Canada.
IMGC is a joint venture between National Housing Bank, an RBI subsidiary that regulates housing finance companies in India, NYSE-listed Genworth Financial, International Finance Corporation and Asian Development Bank.
Chanda Kochhar, MD and CEO of ICICI Bank, said, “We foresee that a young population and rapid urbanisation will lead to the emergence of enormous demand for affordable housing in Tier II and Tier III cities. This initiative will catalyse the growth of the Indian mortgage market by giving consumers improved affordability without incremental risks for lenders.”
The bank’s average ticket size of home loans is about ₹35-37 lakh with an average tenure of 12-13 years.
ICICI Bank’s housing loan portfolio is growing at 25-27 per cent and constitutes about 55 per cent of the total retail book.
Source : http://goo.gl/lKjTHp
K R SRIVATS | NEW DELHI, OCT 18, 2014 | Hindu Business Line
Call this a diwali gift from National Housing Bank, the housing finance regulator, to all future home loan borrowers.
Retail home loan borrowers can now bring in lower amounts towards their initial contribution for availing themselves of housing loans from housing finance companies (HFCs).
Lower upfront contribution
This facility of lower upfront contribution (towards home equity) will be available in cases where the home loans availed from HFCs is above ₹ 20 lakh.
Also, such loans should be supported by a mortgage guarantee cover issued by a registered mortgage guarantee company.
In India, the total HFCs’ portfolio of retail housing loans stood at about ₹ 3 lakh crore. About 55 per cent of this is loans above ₹ 20 lakh.
Under the latest regulatory relaxation, NHB has now allowed HFCs to provide housing loans above ₹ 20 lakh with a loan-to-value (LTV) ratio of up to 90 per cent if such loans are supported by a mortgage guarantee.
This move could affect the pricing of such home loans and encourage HFCs to cut lending rates given that there would be lower default risk thanks to the mortgage guarantee cover.
This would increase potential home owners and add further depth to the retail housing loan market in India.
Simply put, borrowers looking to avail themselves of housing loans above ₹ 20 lakh need to bring only 10 per cent of the loan upfront and the balance 90 per cent could be funded by the housing finance company.
Prior to this latest regulatory change, LTV ratio was limited to 90 per cent for loans up to ₹ 20 lakh, 80 per cent for loans up to ₹ 75 lakh and 75 per cent for loans over ₹ 75 lakh.
“This is a win-win for both the borrowers and the HFCs. This I believe, can be a big game changer and can indeed revolutionize the retail home loan market in the country,” R V Verma, former Chairman and Managing Director, NHB, told BusinessLine here on Friday.
Verma, who had mooted and pushed for this facility when he was at the helm of NHB, also said that the Reserve Bank of India (RBI) should allow a similar dispensation for home loans extended by banks.
For India Mortgage Guarantee Corporation, the only registered mortgage guarantee company till date in India, the move will help it share part of the HFC’s risk on high LTV housing loans and enable HFCs to deploy their capital optimally.
Source : http://goo.gl/cTIWfo