State-run banks are making it easier for you to get home loans

Mumbai: Equipped with better liquidity and lower rates, public banks are intensifying their loans to home buyers. State-owned lenders including State Bank of India and Bank of Baroda have announced special schemes to wrest market share away from private lenders and home finance firms that are currently facing a liquidity squeeze and higher costs.

'Switch karo, save karo'

Bank of Baroda recently launched the 'switch karo, save karo' scheme to permit customers to switch their home loans without any income proof, on the condition that a minimum of 12 monthly instalments have been paid and their credit score is at, or above, 725 points.

"This scheme has started recently as we have received a good response so far. It is difficult for us to get customers who do not have a clear income certificate or tax statements. However, a lot of NBFCs have done due diligence and given loans to this section of the population. Since they have a repayment record, it is easier for us to onboard them at our rates which are lower," said Virendra Kumar Sethi, head mortgages at BoB.

Bank of Baroda's home loan rate is linked to its one-year marginal cost of funding-based lending rate (MCLR) — at 8.75 percent presently. The bank offers home loans at 9 percent for those individuals with credit scores of 725 up to 759. On the other hand, home finance company DHFL's starting rate offered is 9.75 percent, according to its website.

'NBFCs not scaling up business like before'

"NBFCs are not scaling up business at the same pace as they were doing before, while we expect to continue growing. We have grown our mortgage book at 17 percent to 18 percent in the last two to three years and expect to grow at that or faster adding to our market share," said PK Gupta, managing director at SBI.

Earlier in February, BoB slashed its home loan rate on loans up to Rs 30 lakhs from 8.75 percent to 8.70 percent.

The bank has also increased its home loan book to Rs 51,300 crore in December from Rs 19,500 crore in March 2014. "Mortgage business makes up a majority of the bank's retail assets business because the chances of a credit loss are less, the capital charge on these loans is minimal, and it's a growing profitable business for us," Sethi said.