Loans available, Banks following all guidelines stringently

Although the banks are offering home loans at 8% - 8.5% but it is not easy to get loans. Recently Brajesh Dhoot went to a private bank for a home loan bank offered him a loan at rate of 8.75 per cent for 20 years. The bank also agreed to pay 90 per cent of the total cost of the home.

After this, Dhoot started looking for a house. When he found a suitable apartment and he submitted the documents to the bank, but to his surprise he found the bank has changed the rules.

Though bank was offering 90 per cent of the total cost of the house, but the value of the property was reduced by 15 per cent. This is not the only case, banks agreeing to give loan, but have tightened norms. Some of the measures banks are taking are:

Direct selling agents (DSAs) told banks have reduced the loan-to-value (LTV) ratio by 5-10 per cent – this reduction has a significant effect if you are buying a house. Vinod Prajapati, a DSA told, “Earlier, banks used to lend up to 85-90 per cent of the agreement value (including registration and stamp duty charges). Today, the limit is 75-80 per cent.” For instance now ICICI Bank website shows the LTV ratio 80 per cent, previously it was 85 per cent.

According to industry sources banks are doing their own valuations. For instance if the value of the property is Rs 50 lakh according to the agreement and the bank executive puts the values at Rs 42 lakh, the bank will sanction the loan amount according to the latter’s valuation. Earlier also the banks used to do their own valuations but agreed to give loan according to the agreement value.

Another significant change banks are doing is fall in the installment-to-income ratio (IIR). On this basis bank decides the amount loan you are eligible for depending on your take-home salary. DSAs say there have been 5-10 per cent fall in IIRs.

According to financial expert, “The IIR is higher for those with lower salaries”. Suppose an individual is earning Rs 20,000 the IIR will be 55-60 per cent. While people earning between Rs 25,000 and Rs 50,000 the IIR will be 45-50 per cent.

In case of personal loan the things can be worse. If you do not have a salary account with the bank then you might not get a personal loan. According to a banker, “Even a person with a salary account will require a guarantor”.

DSAs are required to bunch an insurance product with a loan and this is done in cases where the bank is lending more or negotiating on some other criteria’s.

For sectors the banks have completely stopped lending which include business process outsourcing, software and exports were already in the black-list. To this list aviation has been added.

In case a loan applicant is working with a small company, banks have started checking the balance sheet of such firms to check their financial stability. If the customer is unable to provide the details, he is asked to get a company profile form filled by the employer.

In case of second-hand purchase the loan applicants have to do extra paperwork. Now it has become compulsory to submit occupancy certificate, commencement certificate and approval plans. But this is difficult as many old societies do not have all the papers with them.

Prajapati pointed out, “Even for a small deviation such as marginally increasing the LTV, the case paper now goes to higher authorities”. Over a year, junior executives were had the authority to take a call in such matters.

However the loans are available but banks are following all guidelines stringently. The potential borrowers are required to have an extra cash in hand to handle the last-minute situations.