State Bank of India (SBI) – the country’s largest lender – is considering a full refund of the principal amount to home loan borrowers if the builder fails to handover an occupancy certificate (OC) within a stipulated time.
On Wednesday, SBI unveiled a product called Residential Builder Finance with Buyer Guarantee (RBBG) wherein borrowers buying apartments in projects where SBI is the sole lender will get this guarantee.
Through this scheme, SBI plans to serve the purpose of boosting the stressed real estate sector and will give confidence to buyers as well.
Interestingly, SBI was never too big on builder loans.
SBI’s total exposure to residential and commercial real estate loans would be less than Rs 5,000 crore.
That is about 0.2% of its Rs 22,48 Lakh crore loan book as of the September quarter.
The Reserve Bank of India (RBI) considers lenders exposure to commercial real estate as a riskier affair and hence mandates stringent provisioning norms.
Lenders are required to set aside more money as standard asset provisions between 0.75-1% for these loans.
To push credit growth, SBI, last month, cut its lending rates linked to the central bank’s repo rate by 25 basis points (bps) to 7.8%, lowering borrowing costs for small businesses and homebuyers.
Earlier in December, SBI had announced a 10 bps reduction in its one-year marginal cost of funds-based lending rate (MCLR) to 7.9%.
It was the eighth consecutive cut in MCLR in FY20.
Banks used to follow MCLR norms for setting rates for retail loans before the advent of external benchmarking.
Meanwhile, Sintex Realty has become the first developer to sign MoU with SBI for three residential projects in Mumbai.
While this is a welcome move in favor of home buyers it is unlikely to generate any immediate benefits as demand for loans is still to start in a big way especially considering the present weak demand and high unsold inventories in the system
While this move by Sbi would help the affordability segment there are many other smaller players who are also offering competitive and consumer-friendly payment terms to customers in the present market scenario
Hence it will take a long time before we see the financial benefits coming in for Sbi for this newly launched real estate package to retail customers
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