5 things to look out for in your home agreement

Source : money control:2011
Photograph: Vipurva Parekh 

YOU just got news that your home loan has been approved and you are on your way to see an existing model of your future home. Your heart is pounding with excitement, but wait, the tedium of paperwork is not over yet. You need to ensure that your agreement with your builder has no unforeseen loop holes that can plunge you in a legal mess!

Here are five essential steps you need to take to avoid such situations.

Aspect 1: Cost of your dream home

There are various costs attached to the owning your home besides its cost. The cost covers basic utilities like electricity, water, parking space, various taxes and in certain instances the registration charges as well. These may come as part of the deal or may be charged under separate heads. Make sure all these costs are factored into the final price you pay.

Safety points 

Scan the agreement with great care for all these charges

Get the agreement ratified with a real estate lawyer to see if there are any hidden or missed out charges. So, you can have an upfront discussion with the builder and have the document corrected.

If the extra charges are for alterations made to the original plan, ask the builder for the sanction letter provided by government authorities for such alterations.

Aspect 2: Size of the house
Look for the specifications in the agreement that defines the size of the house. This should be clear and specific. Also, look for a clause that says ‘…the plans, designs, and specifications are tentative and the developer reserves the right to make variations and modifications….’ This might mean that you may agree for a certain size, but the builder can give a different size.

Safety points 

Do a thorough check on the builder to determine his track record in project delivery. The way the builder has handled the past projects should serve as a measure to how your project is going to turn out.

Discuss with your lawyer and think about including another clause that provides a definite range to the maximum and minimum size beyond or below which the builder cannot venture. 

Aspect 3: Carpet area

Carpet area is the space where it’s possible to lay the carpet. It does not take into account the area of the walls and balcony. When you include these areas as well to the carpet area you obtain the total built up area of the house or apartment. Additionally, if you include common spaces like lobby, lifts, stairs, garden, swimming pool etc., then its termed as the super built up area. The actual carpet area is bound to be around 20 to 30 per cent lesser than the super built up area. 

Safety points

Always base your purchase decision on the carpet area of the flat.

Double check if this area is specified in the agreement.

Discuss with your builder and the lawyer to make sure it’s possible to include a termination clause if the final construction of the house has a carpet area lesser than what is specified in the agreement.

Aspect 4: Completion of construction and date of possession
During the realty crash that occurred in the recent past, there have been several instances where projects have not been completed on time. Though agreements have a tentative date of possession it is important to for you to check this aspect of the deal. 

Safety points

Monitor the progress of the construction and keep a regular tab on it.

Follow up with the builder if you find the progress painfully slow and request him to step it up. Keep in touch with the builder as the work progresses.

Establishing a society with other buyers in the case of an apartment complex, will ensure that things happen at a decent pace from the builder's side.

Aspect 5: Completion certificate 
When the project is completed and the house is delivered to you ensure that the builder provides you with a completion certificate. This certificate provided by the municipal authorities authenticates that the building complies with the approved plan and obeys all government norms and specifications. This certificate is critical for the registration of the house and to complete other legal formalities. 

Safety points

Make sure the agreement has a clause that indicates the certificate will be handed over to you on completion and hand over of the house/apartment.

Again a society could help move things faster if the builder is laid back about this aspect.

Apart from the above mentioned aspects an overall quality check on the construction, society management etc. are important. Ensure these aspects are also covered in the agreement. Be aware and clued on about what you are getting into before you sign the dotted line.

Do pre-approved loans work for you?

Source :livemint: Abhishek Anand :Thu, Sep 1 2011. 11:37 PM IST


This type of loan comes with many terms and conditions. 
Ensure you know them well before you go for one


A few months back, Delhi-based Punit Bhardwaj booked a flat in Noida. 
While he managed the initial booking amount from his own resources,
 he was banking on a home loan for the rest.


 To his dismay, the bank turned down his loan request 
because there was a problem in his credit report.
 To make matters worse, the builder has refused to cancel the booking.


“I had availed a personal loan and was punctual in paying my instalments.
 But due to some error on the part of my bank, my credit information
 report shows a default against my name. Owing to same reason,
 the bank (different bank) is refusing to finance me any loan,” says Bhardwaj.


 Now Bhardwaj is running between banks and non-banking financial companies.
 A little foresight and planning could have saved him the trouble.

A pre-approved loan ensures you don’t face last-minute hiccups
 such as these. But remember that they tie you down with terms and conditions.
What is it ?


A pre-approved loan is one that is approved for a purpose before the need for it actually arises. 
The most common is pre-approved personal loans, but home and car loans, 
too, get pre-approved. Banks usually offer pre-approved personal loans on
 their own to customers, who have a relationship with the bank in the form
 of a salary accounts, deposits or loans, among others.





Personal loans are usually pre-approved based on your financial health
(read balance in your savings account), but in order to get housing loans
pre-approved, you would have to go through the entire paperwork that is
 normally required for a home loan. The only difference is that the bank 


does not run a check on the property’s title; this is done when the loan
 actually gets sanctioned. 


So you would have to produce your salary slips, 
income-tax return receipts for previous years, among other documents.

“We take into consideration all the criteria that the bank normally have 

and if someone fulfils those criteria, we issue a pre-approved

 loan arrangement letter in favour of the customer which remains

 valid for two months and within the given time frame 

the customer needs to locate a property,” says Sunil Pant, 

chief general manager, State Bank of India (SBI).

 The process is the same in case of other banks, too,

 but the tenor for which the loan is approved varies from bank to bank.

Like all other loans, you need to pay a processing fees here too.

For instance, SBI charges a processing fee of 0.25% 

for loans up to Rs. 25 lakh. So, if you are availing a home 

loan of Rs. 25 lakh, you need to pay a processing fee of Rs. 6,250.

The benefits

Know your budget: When pre-approving a loan, the bank looks at your repaying capacity and accordingly fixes the loan amount. This gives you a budget and you have to look for a house that fits into this budget.

“One can add his own contribution to the amount which we have mentioned in our pre-approved arrangement letter and shop around the same budget,” says Pant.

Get discounts from builders: Some builders provide discounts to customers who have pre-approved loans since there is surety that the person is interested in buying a house.

“Since you already have an in-principal approval, you can bargain for additional discount with the builder and at the same time can negotiate with other builders, too, and should settle for that builder who offers the best deal,” says Satkam Divya, business head, Rupeetalk.com, a NetAmbit venture.

Time lines not a worry: Customers often complain about the time banks take in sanctioning a loan. There have been cases where people have missed the property of their choice. A pre-approved loan solves such problems.

The drawbacks

Meet deadlline for house hunting: Even though you are required to do complete paperwork, the loan remains valid only for a particular time frame fixed by the bank. For instance, while SBI pre-approves a home loan for two months, Kotak Mahindra Bank Ltd pre-approves for six months.

It is possible that you do not get the house of your choice in the stipulated period. If you fail to identify the property in the given time frame, the loan agreement gets cancelled and the process needs to start afresh.

Pay processing fees twice: Another thing that pinches is the fact that in case you are unable to use the pre-approved loan within the stipulated time and get it approved again, you would have to pay the processing fees again.

Loan amount may vary: When calculating the loan amount, banks consider your repaying capacity at the prevailing interest rates. However, interest rates may change during the pre-approved tenor. If that happens your eligibility for a particular loan amount may also change. In fact, banks factor in interest rate changes every month and accordingly keep changing your loan amount.

No guarantee: A pre-approved loan does not provide the guarantee of lending. For instance, if you finalize a house but the bank does not find the title of the property satisfactory, it may withdraw the loan it approved earlier.

Nonetheless, a pre-approved loan indicates your ability to borrow and whether or not you fulfil the criteria laid down by the bank. So it may come handy

Justice for old borrowers?

Better deal: Home loan should not be a burden for the purchaser any more. 

                Source :R.P. DESHPANDE,The Hindu,May 22,2010

The RBI has made it clear that any change in the base rate will apply to new as well as old housing loan customers

  One of the major grouses of existing home loan borrowers is that they continue to pay higher interest, while banks and Home Finance Companies (HFCs) are offering much lower interest rates to new customers.

In the past one decade, under the ‘BPLR (Benchmark Prime Lending Rate) regime', banks and HFCs have manipulated the provisions to suit to their needs at the cost of existing customers. But the existing borrowers can cheer now, as under the ‘base rate' regime, to be effective from July 1, 2010, things are expected to change for the better.

It is reported that the Reserve Bank of India, in its guidelines on the ‘base rate' (the new benchmark that banks will use to price loans), has made it clear that any change in the base rate will apply to new as well as old customers.

The ‘base rate' system would be applicable to all banks and as such the housing finance regulator (National Housing Bank) may issue separate guidelines for home finance companies (HFCs) to ensure transparency in fixing interest rates on home loans.

What is base rate?

Due to the anomalies found in pricing of various loans under BPLR method and due to public outcry against non-transparent factors used in pricing of loans, the Reserve Bank has come out with a new method of fixing interest rates on various loans, called the ‘base rate' method.

In this, banks will have to consider average cost of funds and add the profit margin to it. However, credit risk, tenure (loan repayment period) and other influential factors will be loaded to the base rate. The RBI has made it clear that there has to be a transparent method of fixing interest rates to be charged on each loan product.

The RBI will further have periodical supervisory review or scrutiny to ensure proper pricing on loans and transparent factors used to calculate pricing.

Under the ‘base rate' regime, the best part is banks will not be allowed to offer loans at interest less than the base rate fixed, which will have to be reviewed at least once in a quarter. Under floating rate loans, banks may not be allowed to offer teaser loans (luring new customers with lesser interest rate initially but charge them higher interest later on) and banks will not be allowed to charge different rates for old and new customers.

As per RBI guidelines, ‘base rate' method will have to be applied for not only new loans and loans coming up for renewal from July 1, 2010, but for existing loans also.

For existing borrowers, banks will have to provide an option to switch over to the new system before the expiry of the existing contracts, on mutually agreed terms. However the RBI has made it clear that the bank cannot charge any switch-over fee for converting an existing loan from BPLR to the ‘base rate' system.

The ‘base rate' may vary from one bank to another as RBI has allowed banks to choose any benchmark to arrive at the base rate for different loans, but the factors considered to arrive at the rate will have to be transparent and should be disclosed to the public.

No more balance transfer

In the recent past, many home loan borrowers have opted for balance transfer of their home loan account from one bank to another, as they found, their bank has been charging 2-3 per cent more interest than the prevailing rates offered by other banks.

Such borrowers have not only paid 2-3 per cent as pre-closure charges on the outstanding loan amount but also spent considerable amount on processing fee and insurance premium etc.

Since teaser loans are being continued to be offered by major banks and HFCs (Home Finance Companies), you may be thinking of shifting your home loan account to another bank/HFC. Hold on till July 2010, when the ‘base rate' regime starts and you may get an opportunity to shift to the ‘base rate' without spending any amount.

Let us consider the case of Mr. Rao who is paying an interest of 11.5 per cent on his home loan and is getting lured by some banks offering him 8-8.25 per cent interest for one year and later on 9-9.5 per cent, under floating rate schemes. 

It is advisable for him to wait up to July 2010, when the ‘base rate' scheme would begin and the rate may be fixed at 8-8.5 per cent. It is likely that home loans for all customers (new and old) would be offered at base rate plus one per cent. 

Hence Mr. Rao may get an opportunity of shifting to the base rate scheme having 9-9.5 per cent interest on his home loan, at no extra cost.

It is hoped that the ‘base rate' system will enhance transparency in lending rates and usher a new beginning in the financial system of the country.

(The author is a Director of Institute of Home Finance and can be contacted at deshpanderp2007@gmail.com)

Know how to choose the right tenure

Source:The Hindu,Bangaluru

Part prepayments reduce not only the term of the loan but also the total interest payable

Home loans are for the long term and as such, banks and Home Finance Companies (HFCs) normally offer repayment tenure up to 240 months (20 years). Some banks offer tenure up to 300 months (25 years) also. For salaried class applicants, normally repayment tenure is offered up the age of retirement and for self-employed applicants, the tenure offered would be up to the age of 65.

When home loans are provided jointly for husband and wife, father and son, normally the tenure offered would be up to the retirement of elder applicant, if salaried, or up to 65 years, if self-employed.
Let us analyse the pros and cons of long term vis-à-vis short-term repayment tenures.

The longer the repayment tenure, the higher is the loan eligibility. Let us assume that the applicant's income is Rs. 45,000 per month and the credit norm of the lender allows EMIs to be 40 per cent of the applicant's income. The applicant would be eligible for a loan of Rs. 8.67 lakh at nine per cent interest, if he chooses short-term repayment of five years. He would be eligible for Rs. 20 lakh at nine per cent interest, if he chooses a 20-year tenure

The longer the tenure, the lesser is the repayment instalment (EMI). For a loan of Rs. 20 lakh at nine per cent interest, the EMI for five years would be Rs. 41,517 and for 20 years' tenure, the EMI would be Rs. 17,995

The interest payable over the longer tenure would be very much high as compared to the shorter tenure. The interest payable over 20 years would be Rs. 23,28,450 approximately and for five years, the interest payable would be just Rs. 491,000 approximately.

Another disadvantage of long-term loan is that in the initial years of repayment, the principal loan amount repaid is very much less as compared to short/medium-term loans. For example, in the 25-year tenure, the loan repaid for the first three years is Rs. 22,314, 24,407 and Rs. 26,696 respectively. In the case of 10-year tenure, the loan repaid for the first three years is Rs. 1,29,278, 1,41,406 and 1,54,670 respectively.

Balancing act

Suppose the applicant is 35 years old and opts for a 25-year tenure, not only he will pay total interest of Rs. 30,35,118, he would be paying EMIs throughout his service. If he chooses the short term, he may not be eligible for the required loan amount as property costs are still very high.

Since interest rates have come down from 12-13 to 8-9 per cent, it is likely that interest rates would go up in future. In such a case, suppose the borrower has opted for a shorter tenure, the lender may allow him to extend the tenure. If he has opted for the longer tenure, he would be in for more hardships, as increased EMIs may become a burden or repayment may even extend beyond his retirement year and as such he would be in a life-long debt trap.

The balancing act is tough and you need to do proper home work and choose the right tenure.
In the U.S., since interest rates are very low (3-5 per cent), 30 years repayment is viable. But in India, where historically interest rates are higher (10-12 per cent), long-term loans are not advisable.

As can be seen from chart 1, the loan eligibility is very less for short-term schemes. Hence, for most of us, it becomes mandatory to choose longer periods ranging from 15 to 20 years.

After choosing the long-term tenure, you need to plan for lump sum part prepayments, as most banks and HFCs allow you to make part prepayment 3-4 times in a year without any penalty. Since part prepayments are apportioned towards principal outstanding, the loan tenure gets reduced. Thus, part prepayments not only reduce the term, the total interest payable also comes down considerably and the best part is that you will be getting rid of the loan much earlier. If you can prepay lump sum equal to 4-5 EMIs in a year, the loan tenure reduces to 10-11 years from 20 years.

by R.P. DESHPANDE The author is the Director of Institute of Home Finance and can be contacted at deshpanderp2007@gmail.com

Any rate hike to dampen residential segment

Source:BS:Debasis Mohapatra / Chennai/ Bangalore March 30, 2010, 0:47 IST

Any further hike in policy rates by the Reserve Bank of India(RBI) is expected to dampen the demand for the residential real estate segment due to the rising cost of home loans.



RBI recently hiked the repo and reverse repo rates by 25 basis points to check the spiraling inflation in the country. Any further rate hike is also expected as the RBI has hinted to do so in order to suck excess liquidity from the market.

However, the only silver lining for the real estate players is that banks are yet to raise home loan rates despite the hike in policy rates.

“In the post-hike scenario, we don’t see any kind of impact on demand for residential houses as banks are yet to raise rates. However, any further hike in policy rates is expected to put pressure on demand as banks will follow suit,” J C Sharma, managing director of Shobha Developers said.

He also said that as long as home loan rates stayed within single digit, the present demand would persist.

Presently, home loan rates are hovering in the range of 8-9 per cent with schemes of teaser loans floated by some banks.

“There is a clear indication by RBI of tightening rates and rolling back of stimulus package. However, it is yet to be seen how the policy rate hike is transformed into a rise in home loan rates,” H S Upendra Kamath, executive director, Canara Bank said.

He also said that though there would be some kind of a hike in housing loan rates, that would not be abrupt to destabilise the demand scenario.

In addition to home loan rates, policy rate hike will fuel higher lending rate by banks. So, real estate players with higher cost of funds are expected to pass this cost to the consumers, which in turn may see price rise in this segment.

As per a CRISIL report, residential market is expected to turn positive this year owing to improvement in affordability, steady economic growth and greater liquidity.

A research report of Fitch also notes that fundamentals of Indian real estate sector is improving as seen by better liquidity and improved demand in the residential segment. However, concerns of moderately adverse policies still remain as economic conditions become more stabilised, the report says.

“Demand from residential segment remains robust as of now and any rate hike will work as a deterrent for this sector. However, demand will not be substantially impacted,” Shailesh Kanani, an analyst of Angel Broking said.

He also said that real estate players had again started raising prices in residential segment, which could negatively impact demand scenario with further rate hik

New Rates not for old Home loans

 

Source:HT


Central bank proposes. Commercial bank disposes.
While the Reserve Bank of India (RBI) is frowning at
“teaser” home loan rates that come cheaper to new
customers, banks say they cannot honour old loans
with the same rate as it could hurt their profitability.


RBI had raised serious concerns over teaser rates
saying that these lack transparency and may lead to
unviable loans – called bad assets.
It also wrote a letter to the Indian Banks Association
seeking explanation on teaser rates and asking banks
to extend the same benefits to existing and old customers.

Keki Mistry, vice-chairman & CEO, HDFC told Hindustan
Times that his firm had not received any letter but added that
interest rates were a function of the overall cost of funds for
banks. Some bankers said the cost depended on fixed
deposit rates that cannot be altered easily.

“When the cost of funds come down the benefits are
transferred to both old and new customers.

However, the cost of fund has to come down in the
existing balance sheet. It is so that one raises
Rs 100 crore or Rs 500 crore and give out loans
of that amount. But when the cost of fund changes,
it changes only for the new money that comes in and
so the existing customers continue to be at the same rate.
These are the complexities,” Mistry said.

Last week, RBI deputy governor K C Chakrabarty
said that banks should not exclude one customer
segment from a benefit extended to another. Banksers squirm at this.

“Such rates have been offered to new customers based on their
repayment capacity and whether they would be able to increase
their monthly payment. It cannot be extended to the old
borrowers whose credit repayment analysis have
been based on other criteria,” a senior official at a
public sector bank said on condition of anonymity.

However, J.M. Garg, chairman and managing director,
Corporation Bank said that the contours of interest rates
may change after the implementation of the proposed
referential base rates slated to be in effect from April 1.

Indian Banks Assocaition’s chairman MV Nair did not
respond to calls made by HT.

SKS Microfinance to Offer Home Loans

Even as realty markets are trying to shake off the downturn impact, SKS Microfinance, the largest microfinance company in terms of assets, is set to offer its customers loans for their housing needs. The company on Thursday said it has joined hands with the Housing Development Finance Corporation (HDFC) in its attempt to bridge the critical gap in the housing finance needs of the poor.

The pilot project will be conducted in Andhra Pradesh among credit members who have been with SKS for at least three years. These loans will be towards extension and improvement of dwelling units which double as income-generating units like eateries, kirana shops, papad and agarbathi-making units, among others. Most microfinance clients belong to the low-income category and do not have any documented source of income.

HDFC will provide technology support and the first tranche of funding worth Rs 10 crore. This loan to SKS would help fund about 1,250 members, considering an average ticket size of Rs 80,000. “While SKS will borrow at variable rates, we are lending at fixed rates of interest for a five-year period,” said Suresh Gurumani, CEO, SKS.

SKS member clients can avail loans ranging from Rs 50,000-1 .5 lakh, with tenure between three and five years, which will be delivered at their doorstep. However, unlike other products of SKS, the liability would not be at the group level and it would be offered as individual mortgage-backed loans.

“The launch of our housing microfinance initiative follows massive demand from our members who have no access to formal institutional funding. The interest rates charged are risk-adjusted rates that compare well with industry rates for urban self-employed and non-formal sector clients,” said Mr Gurumani.

According to him, the operational costs and risks are much higher as borrowers of these loans do not have any income papers or bank accounts and all transactions are in cash. Also, while we borrow at variable rates, we are lending at fixed rates of interest for a five-year period,” he added.

“This association helps HDFC to contribute to the financial inclusion story of India by reaching services to the grassroot levels. We hope that similar efforts of other MFIs would facilitate in shaping the housing microfinance sector,” Renu Karnad, joint managing director, HDFC, said. Other MFIs including Basix and Spandana had offered similar products earlier.

Home Loans – a Force Behind Real Estate Boom

November 22nd, 2009 |

The home loans or housing finance has been a force
of significant importance behind the real estate boom
in India. Home loans in India have enabled the real
estate industry to achieve new heights.

It will not be wrong to say that finance is the very life
line of the real estate industry in India.

Everybody from the developers to the buyers rely on
the finance provided by the banks and housing finance
companies in India to give shape to their dreams.
The finance industry has been growing very rapidly
 in India and has been providing seamless credit
facilities to all class of people.

The home loans / finance facility is provided
 by almost all the government and private banks
 governed by the Reserve Bank of India (RBI).

Their facility of home loans can be availed for
 various uses like purchase of property, renovation,
construction etc. Apart from this you can also get
home equity loan, a unique concept wherein the
borrower can mortgage his existing property to
avail loan that can be used for any kind of purpose
as desired by the buyer.

Generally, people avail home equity loan facility
for the purpose of marriage, education, or bearing
medical expenses. The maximum loan amount that
banks normally offer is about 60% to 65% of the
 market value of the property.

The housing finance companies follow a very
stringent process while providing a home loan.
The loans are disbursed in line with the credit
policies of the home finance bank and financial
 institution.

As part of their process, banks verify the credit history
 of the borrower to ensure that he/she is not a defaulter
 with some other financial organization or if he/she has
misused any of the banking products.

A dream home of your choice comes into existence
only after a lot of investment of money and time.
Therefore, it becomes very important to keep this
treasured property protected from possible risks and
dangers.

Home insurance is the best way to protect your
 home from all potential perils. The risks that can
be covered under a home insurance policy can
range from loss that can occur due to natural
calamities like fire, earthquake, and cyclone
or to insure the contents of the house from theft
or damage.

The home insurance in India is still at a
 very embryonic stage and is being promoted
 by many private and government general insurance companies.

Getting home loans is not much of a problem
today provided you are eligible to take one.
There is a cut-throat competition amongst the
 housing finance companies to make their offers
more attractive.

This fray is good for the customers as they get
home loans at affordable terms. Home loans in
 India has come a long way and has got widespread
 acceptance as more and more people are purchasing
through this mode.

Banks bet on home loan disbursals

Aparna Iyer & T Bijoy Idicheriah /

Mumbai: At a time when sluggish credit growth is threatening to
 stunt the evident overall recovery, and corporate credit is also not
 yet taking off, banks are making a last ditch effort to expand their
 loan portfolio through home loans.

With an improvement in employment prospects and income turning
steady after the lull in 2008 and early 2009, demand for houses is
growing gradually.Festive season home loan schemes just added
 the much-needed fuel to this recovery.

"There has been some pick-up in retail demand following the
introduction of festival home and car loans at attractive interest
rates which is improving the credit offtake scenario," said Albert
 Tauro, chairman and managing director, Vijaya Bank.

Big lenders such as State Bank of India and ICICI Bank are
betting on growth in retail loans, especially home loans, to
prop up their overall credit expansion. For most players,
home loans form at least 6-10% of their total credit portfolio.

Year-on-year growth in banks' total loans has slowed to
single digit and was just 9.5% as of October 30 compared
 with 28.4% a year ago, according to the latest RBI data.
As of August 28, outstanding housing loans of banks were
 Rs 2.85 lakh crore, or 10.8% of total loans, the RBI's
macroeconomic report showed.

In the first eight months of 2009-10, home loans had
 grown 4.5%. Most banks witnessed at least 20-25% growth
 in their home loan book in July-September, and expect
 to see a similar trend in the coming quarters too.

Last week, Bank of Baroda chairman M D Mallya had said
the bank's home loans have grown 25%. Union Bank of India's
 home loan book has grown 24-25%, according to S L Bansal,
 general manager -- retail banking.

Housing Development Finance Corporation, the country's
largest home loan lender, is already witnessing a rise in
 loan applications, according to joint managing director
Renu Karnad.

"The segment where we are seeing good demand is in the price
range of Rs 30-50 lakh in metros and bigger towns and
around Rs 20-25 lakh in smaller towns," Karnad said.

With loan applications rising, bankers expect to turn these
into disbursements in the coming months, thereby giving
 a fillip to the overall disbursal of banks. Banks are also
cashing in on the rising demand by extending their special
 home loan schemes that offer lower fixed rates.

State Bank of India recently extended its special 8% home
 loan scheme to up to March 31. Every month, SBI is
witnessing disbursal of Rs 2,000 crore,
 chairman O P Bhatt had said on October 31.

Following SBI, Corporation Bank extended its scheme
to March 31 while Axis Bank also announced a special
scheme through which the bank will dole out loans
at 8%. Union Bank of India has a scheme wherein
borrowers will have to pay 8.5% fixed rate for the
 first three years.

However, a sharp rise in property prices could pose
a risk to the rise in home loans.
HDFC's managing director Keki Mistry feels property
prices have to be reasonable for the pick-up to turn
into a concrete boom. "People do not buy houses
just based on interest rates," Mistry said on Monday.

Property prices have already started inching up in
 major metropolitan cities, and the rise has been
sharper in Mumbai and New Delhi. "We are seeing
 some pick-up in demand for home loans. But for
this demand to sustain, builders will have to maintain
 prices at current levels, else demand will get diluted,"
 Punjab National Bank's chairman and managing director K R Kamath said.

Nevertheless, some bankers said the rise in property
 prices in most areas is not sharp, and may not dampen
demand.Another risk is the expected turn in interest rate
cycle as the Reserve Bank of India readies a strategy to
withdraw the accommodativepolicy.

But some bankers noted that monetary policy
withdrawal could have an impact on banks' lending
rates only by March-end.

"I don't think it (rates) will go up much. If rates go up,
 it will be mostly in February or March. And I don't think
property prices will go up in a big way. The government
 is investing in affordable housing also," said Bansal of
Union Bank of India. Rising home prices may pinch buyers'
pockets but affordable home loans seem set for a long stay.

There are fears that a rapid home loan expansion,
amid a potential rise in housing prices, may also push
 up banks' non-performing assets (NPAs).For instance,
State Bank of India witnessed a sharp rise in its net NPAs
in July-September, driven mainly by its retail portfolio.
The bank's net NPAs rose to 1.73% by September
 from 1.55% as of June 30.

Demand for home loans is expected to remain strong
in coming quarters.What bankers need to watch out for
is maintaining asset quality as they give a home loan
push to credit offtake.