SBI launches new home loan plan for executives

The country's largest lender, State Bank of India, on Monday launched a FlexiPay Home Loan scheme for young working professionals, which gives borrowers an option to pay only interest during a three-five year moratorium period.  The customer, thereafter, will pay moderated equated monthly instalments (EMIs).

The EMIs will be stepped up during the subsequent years, capturing payment of the principal component. This arrangement is expected to lower the impact of such additional loan amount on monthly repayments in the form of EMIs, a statement issued by the bank said.

The bank said it would enable young working professionals/executives to get higher loan amounts compared to their loan eligibility under normal home loan schemes.

LOAN RANGER

• The country's largest lender, State Bank of India, on Monday launched a FlexiPay Home Loan scheme for young professionals
   
• Borrowers can pay only interest during a three-five-year moratorium.
   
• The customer, thereafter, will pay moderated EMIs (equated monthly instalments)
   
• The EMIs will be stepped up during the subsequent years, capturing payment of the principal component

While some experts said this was a reintroduction of the so-called "teaser" home loan scheme after five years, Jayanthi Lakshmi, chief general manager (Real Estate, Habitat & Housing Development), SBI, said this was not a "teaser loan scheme" as loans under the new scheme would be given on floating rate basis from the very beginning. Experience shows that salaries earned by professionals rise over a period, indicating improvement in repayment capacity.

Teaser home loans are offered at a fixed low rate of interest in the initial years and are then adjusted to a higher floating rate for the remaining tenure.

In the closing months of 2008, SBI Chairman O P Bhatt had floated a teaser home loan scheme. SBI withdrew the scheme from May 2011 after strong missives from the Reserve Bank of India. Under the teaser home loan scheme then, SBI was offering lower interest rate of 8-8.5 per cent for the first three years. SBI's home loan book has grown by about 17 per cent till date. The outstanding portfolio at the end of September 2015 stood at Rs 1,70,899 crore.