State Bank Of India: Cut processing & Conversion Fees On housing loans


 With the advent of festival season our country India’s largest lender – SBI (State Bank Of India) has embarked upon a special campaign to ramp up its housing loan book.

It is going to reduce the processing fee for housing loans to Rs.1,000 per loan irrespective of the size. The offer would be made available from September 01 onwards

Uniform at Rs.1,000 ..!

Currently, loan processing is at 0.25% of the loan amount subject to a cap of Rs,  6,500 for loans upto Rs. 75 lakhs. For any higher loan amount, the maximum fee ceiling is Rs.10,000. 

For example, if you apply for a loan of Rs. 20 lakhs, you need to pay a processing charge of Rs.1,000. With the new offer, it will be uniform at Rs.1,000 for a housing loan. However, the offer would end on 30th November, 2012.

At the same time, the banking behemoth is actively mulling reduction in conversion fee which is presently at 1%.

For all banks, conversion fees are in the range of 0.50 % to 2%. This move, if implemented, will help the existing (SBI) hosuing loan customers, who are not entitled to get the benefit of reduced interest rates to avail of the lowered interest rates.

Let’s assume the loan size is Rs.30 lakhs and a customer has already repaid Rs.10 lakhs. Therefore, he has to pay Rs.20,000-(that is. 1% of 30 -10 =20 lakh lakhs) one time upfront for the conversion.

Earlier, SBI cut the interest rates on housing loans by over 0.50%, effective from August 7, 2012. However, it did not change the base rate (remains at 10 per cent per year), the benchmark rate below which the RBI (Reserve Bank of India) does not allow any bank to lend.

Currently, a housing loan borrower can avail of a housing loan with interest at 10.25 per cent as against 10.75 per cent prior to the rate cut, for a ticket size of Rs. 30 lakhs. The interest rate will be 10.40 per cent for home loans above Rs. 30 lakhs. The EMI on Home Loan tenor of 30 years is Rs. 897 per lakh which is the lowest in the home loan market.

Sametime, the new rates are available only to the new customers. So, a customer who had taken a loan at a higher floating rate viz. 11.25 per cent will be keen to avail the benefit of the current lower rate. So, he can convert his loan to the new rate by paying the conversion fee.

Mr. Anil Rego, CEO & founder, Rights Horizons, a Bangalore based advisory company said, "Those proposed moves by RBI will certainly benefit customers, who should tap opportunities right in time. However, the bank can't just keep on doing this beyond a point as it may hurt their margins"

With 26 per cent market share, SBI continues to be the leader in housing loan market followed by the privately held HFC (housing finance company)- HDFC .

As of July,  2012SBI's housing loan portfolio stood at about Rs. 1.06 lakh crores. Total retail loans stood at Rs 1.86 lakh crores in the April - June (2012) quarter.

List of Housing Projects..!

To facilitate housing loan borrowers, it is planning to upload the list of housing projects, approved by the bank shortly.  The bank has tied up with about 1,045 such projects across India till July in 2012-13. In order to enlist its projects, a builder has to meet certain norms prescribed by SBI.

For listed projects, the bank sanctions housing loans in 4 to 5 days while it takes about 14 days to approve a housing loan for other housing constructions. The lender offers a loan to value (LTV) of  90 per cent for housing loans upto Rs. 20 lakhs & upto 80 per cent for loans above Rs. 20 lakhs.

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