Despite interest rates easing, people are still finding it difficult to take a best home loans in India. The Reason is Banks now insist that borrowers need to contribute 20%-30% of the property value upfront instead of 10%-15% earlier.
As the finance proportion of the banks has come down from 85%-90% of the property value to 70%-80%, borrowers (mainly the youngsters) are finding it difficult to go for a home loan. State Bank of India which has brought down the home loan rates to 8% lends only 80% of the value of the house if the requirement is between Rs 20 lac and Rs 75 lac. If the loan is more than Rs 75 lac, the bank lends only 75% of the amount. Punjab National Bank lends 75% of the loan for a property of above Rs 20 lac. Other PSU banks like Union Bank & UCO bank also lend only up to 80% of the value of the house. Private sector banks like ICICI Bank and HDFC Bank ask for 20%-30% buyer's contribution while giving a home loan.
The Average price of a two BHK apartment in metro's like Mumbai, Delhi and Bangalore is around Rs 40 lac and in other cities like Kolkata, Chennai, Pune is around Rs 30 lac. So the buyers contribution to buy a house of Rs 40 lac has increased to Rs 8-10 lac, from Rs 4-5 lac earlier. For the youngsters it is acted as deterrent. However the bankers are not bothered. As the Real Estate price is declining banks have increased the buyers contribution so that the market value of the property should not fall below the loan amount during the tenure of repayment. So the banks lends 85% of the transaction and the market value of the house falls by 20% within six months, then the loan amount will become more than the value of the property taken as a security.
In this scenario, the borrowers can decide to walk off - surrender the house to the bank and saying recover the money by selling the property. In order to avoid this the banks have increased the buyers contribution.