Wednesday, October 11, 2006

The customer is king in Indian real estate - competition intensifies among banks to market their home loan schemes.

RENU RAMANATH scans the wide range of incentives and offers that they make these days to lure customers. It is not the private sector and new generation banks alone, but the older, public sector banks too are playing to the same tune offering truckloads of incentives and attractive packages to the customers.

There was a time when getting a home loan was an uphill task that involved a lot of paperwork and trudging up and down to the bank too many times. But no more is it so. Home loans have become a doorstep service.

These days, the banks and financial companies vie with one other for grabbing customers. Offers of all hues flood the housing loan market.

The change in the housing loan sector was seen from around the end of the 1990s. Earlier, the banks were not so keen on housing loans, compared to the industrial sector.

Great demand

However, with the lower industrial rates of the late 1990s, housing finance became an attractive business. There was a huge demand for loans for housing in general.

It is estimated that a total number of 22.44 million dwelling units will be required before this plan, the Tenth Plan of 2002-2007, ends.

The biggest challenge faced by the financial institutions these days is the retention of customers. The change in customers' attitude from that of loyalty to one of convenience has put the financial institutions of India, which had been relying on decade-long relationships to nurture their customer base, in a quandary.

Bargaining power

These days, the customer is offered all the bargaining power that she could muster. It has become a buyers' market, in all ways. So, it is the turn of the institutions to try and come up some golden carrots to woo customers, so that they could be lured into opting for their schemes.

Not only the private sector and new generation banks, but also the older, public sector banks are also playing to the same tune, offering truckloads of incentives and attractive packages to the customers.

Offers of personal insurance has almost become the norm, with almost all the banks offering personal accident insurance along with home loans. State Bank of India, State Bank of Travancore, ICICI Bank, Bank of Baroda, Federal Bank, Canara Bank, Union Bank of India and almost all others are offering such insurance schemes.


Some banks are teaming up with their own Life Insurance groups, such as FBI Life of Federal Bank or SBI Life of State Bank of India, for offering a variety of insurance options. SBI Life offers optional group insurance at a concessional premium.

Almost all banks are now not charging processing fees of administrative fees. Some banks even waive the processing charges for the loans taken over from other banks. And, most of the banks offer additional loans on the same security as that of the Home Loan. The State Bank of India has no cap on maximum loan amount for housing, be it either for the purchase of construction of house or flat.

The SBI allows repayment up to 70 years of age. Fifty per cent concession in charges for all personal remittances / collection of outstation cheques is another incentive.

Another perk offered by the SBI targets the Government employees, teachers and employees of public sector oil companies. This category is given concessional interest rates.

At the Federal Bank, all existing customers of Home Loans are eligible to get the Home Plus Loans at concessional interest rates. Fifteen percent of the housing loan will be available for furnishing and beautification of the house.

Higher income groups can avail of 50 per cent of the housing loan as Privilege Personal Loan. A personal loan up to Rs.2 lakhs will also be available on the same security. As also, a car or bike loan up to Rs.50 lakhs and Vidya Loan for educational purposes up to Rs.25 lakhs.

Add-on loans

The State Bank of Travancore also offers other loans against the housing loan, like Home Decor Loan to furnish the houses/flats, for purchasing furniture, electronic goods and other items.

The HDFC Bank offers 100 per cent of the cost of housing improvement as loan to the existing customers.

The insurance scheme that offers financial relief to the families of the person who has availed of the loan in case of his or her death is also popular these days. You don't have to worry about your family being burdened with the repayment liability.

Under this scheme offered by many banks, insurance takes care of the repayment even if the person who took the loan has died.

The entire loan will be repaid out of the insurance cover. The family will not have to bother about the EMIs or repayments.

Complimentary cards are another add-ons now being promised by the financial institutions. The Bank of Baroda offers the free credit card, `Paras' card, complimentary for the first year, to all those who have taken new home loans of Rs.2 lakhs and above. Free personal accident coverage is given under up to Rs.2 lakhs under `Paras' Credit Card.

The SBI gives a complementary SBI classic / international Credit Card, with waiver of joining fee and the first year's fee. It also gives an option for E-banking.

The ICICI Bank also offers free accidental death cover. The Union Bank of India covers also natural death other than accidental death, under the Union Home Plus. This is, of course, an optional service. ICICI Bank also offers doorstep services.

Replace options

Many banks also offer to replace your existing loans with their own loans, of course, at a lower interest rate. Another trend is offering `Festive Discounts,' at various festival seasons. Discount in interest rates are offered during these seasons.

So, step out and choose between the various offerings being put out by various banks and financial institutions, while the going is good!

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