The emergence of ‘affordable’ housing has revived the real estate market, but prospective buyers have found out that getting a home loan approved has just got a little more difficult.
For one, banks, wiser from the meltdown, are rechecking the installment to income ratios (the figure that determines the EMI). Earlier, banks extended EMI (equated monthly instalment) on the loan up to 50% of the monthly salary. Now, this instalment to income ratio stands between 30% and 50%. “It’s not advisable to have a single number,” says Renu Sud Karnad, joint MD, HDFC.
Moreover, many banks are taking into account only the recurring income of the potential buyer to compute the monthly EMI. “Banks are no longer looking benevolently at other sources of income such as performance bonus, variable pay, while computing the instalment to income ratio ,” says Praveen Kutty, executive V- P and head (retail banking), Development Credit Bank. “Our focus is on income sources that are consistent while arriving at the ratio,” says Karnad.
Kotak Mahindra Bank takes into consideration only the monthly income to calculate the EMI. “We don’t look at other incomes such as bonus because it may not be there every year,” says Kamlesh Rao, executive V-P , Kotak Mahindra Bank. Some banks are assigning sector-wise ‘installment to income’ ratios so that there is consistency in loan disbursals. Such ratios are determined on the performance and the credit rating of the industry.
Analysts say banks are taking the cautious route to improve their risk management. “Some time back, capital was hard to come by. Banks did not want to set aside huge amounts towards lending because if delinquencies arose, they would have had to make provisions for those,” says Clyton Fernandes of AnandRathi Financial Services.
Even when it comes to documentation , banks are more stringent before disbursing home loans. Apart from the pre-requisite documents like IT
returns of three years, PAN card copy and bank statements of the last six months, banks are also scrutinising details such as passbook entries to check withdrawal patterns. “Banks like us are actively tapping the Cibil (Credit Information Bureau) list to check the credit card payment history . Such checking is now integral to the credit buying process,” says Rao.
In case of professionals who have shifted from hometown, banks are asking for title deeds of house in the native place even if it is registered in the name of the parents, to determine repayment capacity of the executive.Safety Tips
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