[ecis2016.org] Is your developer insisting you take your home loan from a bank he has tied up with? There may not be a hidden agenda after all
It is quite difficult to find a reliable property agent who can guide a buyer throughout the process of purchasing a home, right from choosing an apartment to procuring the loan and completing the transaction.
When Komal Shah took a loan for her recently purchased home, the agent (those who facilitate loans) kept asking for a new set of documents every other week. Since it was a resale apartment, the executive she was dealing with wasn’t interested in providing her with the best service. The agent diligently served the developer he was affiliated with, thus, ensuring continual and increased business.
Rationale for developers offering home loan tie-ups
While that’s great for new home buyers, Shah and her husband weren’t very keen on taking a loan from the agent the developer had introduced. “I am quite capable of paying for the house without taking a loan,” says Shah. “However, one of the primary reasons why my husband insisted on taking a small loan, is because banks carry out detailed due diligence which a layman can’t. The developer forced us to take a loan from the bank he tied up with, which made us extremely suspicious,” the couple said.
Realty experts explain that debt-ridden developers use home loan services as a means to generate small commissions on the transaction. “Their commission varies between 0.5 to 1%,” shares Sukanya Kumar, founder and director of loan marketing channel, Retail Lending.
While explaining why developers emphasise on taking a loan from their partners, a sales executive of a leading developer, pointed out that “Buyers take significant time in zeroing in on the best lender. In the meantime, a developer continues to pay interest on the capital finance obtained at the beginning of the project, in order to develop and complete it. The interest that developers pay, ranges between 13-22%.”
Mudassir Zaidi, national director, residential agency, Knight Frank India, says, “There is a cost to every passing day for the developer, until the entire loan amount is disbursed. So, to speed up the process, developers tie up with banks, who carry out due diligence in advance, to help buyers get their loans sanctioned soon.”
Read also : Rs 50 lakh home loan EMI: All you want to know
Banks generally follow a stringent process of due diligence, before funding any project. Therefore, developers emphasise on taking a home loan from approved banks, in order to save time in the entire approval process. Any project that has been approved by reputed banks, assures the trustworthiness of the developer and the deal it is offering.”
Loans from NBFCs
However, it is important to be cautious when the loans are solely being provided by non-banking financial companies (NBFC). “The NBFCs are less strict as compared to banks while funding a project or offering a loan,” points out Mona Jalota, vice-president, operations and strategies, Coldwell Banker India.
Although most banks claim that the loan process can be completed in a week, it may take time to build an eligible and strong profile. It took Shah a month to get the home loan sanctioned, since her husband was working in a proprietorship firm and not a private limited company. Most developers establish a strong network of multiple lenders so that it suits all types of buyer profiles.
If you like this article, you can also read: What if you default on your home loan EMIs?
Copyright belongs to: ecis2016.org