SBI chairman Rajnish Kumar said: “We believe this scheme will build confidence among homebuyers by securing their hard-earned money and at the same time will boost under-stress real estate sector.”
In order to give a boost to the home loan segment, State Bank of India (SBI) has announced a residential builder finance scheme with its guarantee. The scheme promises to return the principal amount invested by the homebuyer in case the project is not completed.
Under the scheme, SBI will focus on the affordable housing segment with home prices of up to Rs 2.50 crore in 10 cities initially. The bank tied up with Sunteck Realty for three projects in Mumbai on Wednesday. The bank expects more such tie-ups with builders in the near term.
SBI chairman Rajnish Kumar said: “We believe this scheme will build confidence among homebuyers by securing their hard-earned money and at the same time will boost under-stress real estate sector.” He added that SBI has well thought out about the eventualities in the scenario of projects being dragged to insolvency court. He said, “All the cash of the builders, be it disbursement and receipt, will be in an escrow account.” Therefore, if a project is taken to bankruptcy, all the payments will be made by that account.
Answering a question on whether the cost of these kinds of home loans will rise, since SBI is providing an insurance to homebuyers, SBI chairman said no impact would be there on their existing home loan rates. The cost of insurance will be covered by agreements with builders. Sunteck Realty chairman & MD Kamal Khetan said: “We will not pass on any extra cost to homebuyers.”
Under this product, all reputed builders fulfilling the prescribed criteria by the bank can avail loans between Rs 50 crore to Rs 400 crore. The standard criteria includes star rating and CIBIL score. SBI has registered 17% growth in home loans up to September compared to last year. Based on responses from this newly-launched product, the lender will set a target for it.