At a time when home loan growth has fallen in the banking sector, banks are now in a race to corner market share with innovative schemes. After State Bank of India (SBI) and Axis Bank, ICICI Bank, India’s largest private sector bank by consolidated assets, has announced the launch of a new home loan product, which offers borrowers the benefit of one per cent cashback on every equated monthly installment (EMI) for the entire tenure of the loan.
SBI had recently launched a new scheme campaign ‘Hamara Ghar’ (our home) that caters to the affordable housing segment. The loan carries a fixed rate of interest for two years up to a loan amount of Rs 30 lakh. SBI also waived processing fees on all home loans. Axis Bank also launched an offering promising to waive EMIs if the borrower does not default on EMIs in an effort to improvise borrower behaviour.
ICICI’s new home loan empowers borrowers to select their preferred mode of cashback, the bank said. “They can choose to utilize the cashback to prepay the principal outstanding of their home loan or take credit in their ICICI Bank account. Both residents as well as NRI borrowers are eligible to apply for the cashback home loan,” it said.
Anup Bagchi, Executive Director, ICICI Bank said, “we have the largest mortgage portfolio among private sector banks in the country. We foresee that a combination of young population and rapid urbanization will lead to the emergence of growing demand for housing in the country. Our new home loan offering offers a compelling and unparalleled benefit of one per cent cashback on every EMI to customers. We believe that this proposition will propel customers to fulfill their aspirations of owning a home.”
Bagchi said the effective rate of interest for a borrower availing of an affordable housing product is 4.62 per cent after factoring in the Rs 2.5 lakh direct cash subsidy from government and also the benefit deriving form the income tax exemptions. The bank will be making the “sacrifice” when it gives the cashback, Bagchi said, adding that in the process, it helps a potential home buyer make faster decisions and get the home.
ICICI Bank’s schemes ensure that the borrower pays regularly through the loan contract period and there is no pre-payment. “For the longer tenure loans, it makes sense for the customer to stay in the mortgage product for a much longer time with all these incentives. The net increase they have to pay out is lower than the investments they can make with the surplus money, if they have,” Bagchi said.
The key features include any loan amount and a loan tenure of 15 to 30 years. Both resident and non-resident customers are eligible to apply. They can also transfer their existing home loan to ICICI Bank. “Customers can choose to adjust the cashback against principal outstanding of their home loan. Or, they can get it as direct credit in their bank account. The cashback will start to accrue from the first EMI itself. It will first get credited to the customer after completion of 36th EMI. Subsequently, after every 12th EMI, it will get credited to the customer,” it said.
Axis Bank’s home loan product — Shubh Aarambh — promises to waive 12 EMIs. Under the scheme, the maximum loan amount you can take is Rs30 lakh. The minimum tenure at the time of disbursement should be 20 years and you can’t prepay before 4 years. Borrowers will have to stay with the bank with this loan for at least 48 months to get the EMI waiver benefit.