How you can get yourself a cheaper home loan
Negotiate with lenders to lower the spread; there are reasons why they might oblige and ways you can shop around
Sep 25, 2013
Source : Business Standard


MUMBAI: The country's largest bank, State Bank of India, raised base rates (BRs) by 10 basis points (bps), last week. This means an effective increase of 0.1 per cent on all loans. In addition, from October 1, the spreads on home loans will go up by five to 10 bps. For loans below Rs 30 lakh, the spread will be 30 bps, as against 25 bps now. For loans of Rs 30-75 lakh, the spread will be 50 bps, as against 40 bps now. This means for loans up to Rs 30 lakh the effective rate will be 10.1 per cent; for between Rs 30 and 75 lakh, the effective rate will be 10.3 per cent.

While the rise in BR will apply to existing and new customers, the increase in spreads will apply to new borrowers only. The Reserve Bank of India defines the spread as an extra amount the banker adds to cover credit risk, profit mark-up, etc. The amount differ between lenders but is usually constant over the life of the loan.

For banks, the spread is 'positive'; the final interest rate is the BR + the spread. For housing finance companies, it is 'negative'. An HFC will mention its rate as a discount to the Benchmark Prime Lending Rate.

In the case of SBI’s loans, the difference works out to Rs 96,000 for a Rs 60-lakh loan, over a 20-year period. SBI’s margins, despite the rise, continue to be the lowest. For instance, ICICI Bank charges 40 bps for loans up to Rs 30 lakh and 65-125 bps for above Rs 30 lakh.

An official from SBI said there was no way the bank would be able to reduce spreads, as the cost of funds had gone up. Yet, there are ways you can negotiate for a better spread at the time of taking the loan. In fact, RBI advises a borrower first check if the margin in case of a floating rate is fixed or variable. So, while looking at rates, check the margin on the loan as well. The website of a foreign bank says, “The interest rates mentioned are indicative and the bank may in certain instances and at its discretion charge a differential pricing than (these) published rates.”

If your lender raises the spread, you can shift to the older spreads by closing the existing loan agreement and signing a new one. You can shift to a new lender or continue with the existing one. To retain the customer, your existing lender will allow you to shift to the lower spread by paying a switchover fee.

Sometimes, loan aggregators are able to negotiate for better spreads from lenders, since they provide bulk customers. Individual borrowers, too, can negotiate for better spreads, depending on profile, credit worthiness, relationship with the bank, value of the property and so on.

For instance, if two customers have the same income but one has fewer loans, then it is possible the lender might offer him better spreads, says an official with an HFC. With more lenders accessing and sharing data with credit bureaus, this will become more common.

If you convince the lender that you have a better offer from a competitor, you might be offered better spreads, in an attempt to retain you. According to Vipul Patel, of Home Loan Advisors, a mortgage advisory firm, there is no standard formula but banks can go down to 25 bps of margin over the BR. “Banks will certainly want to accommodate clients with a clear repayment record. Also, clients who have borrowed less as compared to their property values or disposable income will have a definite edge over others,’’ he says.

Latest Realty News

‘Infrastructure should match realty growth’
Sep 25, 2013
PUNE: Real estate development is happening in the city at a steady pace, but the municipal administration will have to match this progress with infrastructure development so that there is no mismatch between growth of construction and civic amenities, said real estate developers on 22.
Skyscrapers changing the face of Pune
Sep 25, 2013
PUNE: Pune’s growth and development has coincided with the boom of the IT industry. From the erstwhile bungalows and row houses, its skyline was defined by 35-metre apartment developments in the late twentieth century and is now seeing skyscrapers tall enough to capitulate Pune to the ‘developed cities’ club. Besides, the vertical developments have helped in freeing the available ground space, providing better scope for landscaping and economising of services in comparison to any other normal de
Credai creates forum for global exposure
Sep 25, 2013
PUNE: The Confederation of Real Estate Developers Associations of India, Pune Metro, has created an International Business Forum (CIBF) for its members to interact with companies and consultants in other countries with a view to promote trade, technology and knowledge exchange among developers.
TCEL, Autodesk tie up to offer BIM solutions
Sep 25, 2013
MUMBAI: Engineering consultancy solutions provider Tata Consulting Engineers Ltd (TCEL) today said it has partnered with US-based software firm Autodesk to bring building information modelling (BIM) solutions for construction and infrastructure sectors.
Mahindra Lifespaces, GE Shipping in dispute with locals over land ownership
Sep 24, 2013
MUMBAI: A tussle for control over unused land with development potential in a residential project has erupted between Mahindra Lifespaces Developers, GE Shipping and existing residents of their project, Great Eastern Gardens, in a suburb of Mumbai, a development that can have repercussions for builders and home buyers.
Sea-facing Mumbai duplex goes at Rs 1.35L/sq ft
Sep 24, 2013
MUMBAI: Whatever the general market trend, Mumbai's realty market does not stop creating new records. In the costliest apartment deal in the country, a sea-facing duplex in a Malabar Hill building was recently sold for Rs 57 crore or roughly Rs 1.35 lakh a sq ft.
Real Estate Regulatory Bill – Any ‘Real’ Comfort?
Sep 23, 2013
MUMBAI: The Real Estate Regulatory Bill 2013, which the Union Cabinet approved after a long hiatus in June 2013, was touted to be a game-changer for property buyers as well as the industry as a whole. The aim of the bill clearly was to provide buyers with a level playing field in an industry that is perceived as chronically non-transparent.
Top builders sitting on Rs 58,000-cr inventory
Sep 23, 2013
MUMBAI:India’s top builders seem to be sitting on a huge unsold real estate inventory, worth nearly Rs 58,000 crore, which could take more than two years to sell, a Business Standard analysis of 19 listed realty firms on the BSE-500 index shows.
NRIs keen to invest in real estate in India, says developer
Sep 22, 2013
LONDON/MUMBAI: As a sequel to recent depreciation in the rupee, Non-Resident Indians from around the globe have evinced interest to invest in real estate in India, a Mumbai-based real estate developer has said.
Salaried real estate investors in mess as loan cost pinches
Sep 22, 2013
MUMBAI: The deepening economic slowdown, rising cost of living and low wage revisions, coupled with higher interest rares, are forcing salaried professionals who had earlier invested in properties to put them up for sale, say industry experts.

Latest Realty News Of State

Realty Talk's