Justifying the threshold of Rs 20 lakhs (Rs 2 million) for interest rate relief announced for home loan borrowers, Indian Banks Association said on Monday the package will take care of housing requirements of the common man.
"It is difficult for many common men to think of a house if the cost is beyond Rs 20 lakhs, because then he will be bound by EMIs that he has to pay. Therefore, package has been confined to Rs 500,000 and between Rs 500,000 and Rs 20 lakhs.
"It is so structured as to take care of every possible requirement of the common men," IBA chairman T S Narayanasami said.
As part of the IBA package, housing loans up to Rs 500,000 and between Rs 500,000 and Rs 20 lakhs would attract a maximum interest rate of 8.5 per cent and 9.25 per cent, respectively, for the first five years.
To a question on possible increase in disbursal of home loans after implementation of the package, he said the numbers could be gauged in a fortnight.
"I cannot immediately react to the numbers," Narayanasami said, adding that the banks would propagate the scheme to create awareness about the package. ". . .Probably, we will be able to gauge the number (of disbursals) in about a fortnight's time," he added.
In addition to the lower interest rates, the scheme also envisages free life insurance cover for the borrowers, Narayanasami said and added, "While the borrowers up to Rs 500,000 will have to pay a margin money of 10 per cent, those seeking loans between Rs five and 20 lakhs will be required to pay a margin of 15 per cent."
As such, according to him, if anything goes wrong with the borrower over the span of the loan, insurance companies would settle the loan and title of the property would pass on to the family members.
