Real estate news on ICICI Bank launches ‘Mortgage Guarantee’ backed loans for affordable housing

Property loans/ Home loans, ICICI Bank Ltd., Affordable Housing, Mortgage Loan
Posted on Aug 28, 2015

ICICI Bank, Indias largest private sector lender, today launched the countrys first mortgage guarantee-backed home loan product that it claims to be more flexible in terms of both amount and tenure. Speaking at the launch of the scheme, ICICI Bank MD & CEO Chanda Kochhar said the home loan industry has been growing at 15 per cent for over 10 years and the governments focus on housing for all will push up demand for home loans and the new products will increase accessibility of mortgages. The potential risk from the enhanced amount or the so-called “extra” 20% would be guaranteed by the Indian Mortgage Guarantee Corporation (IMGC) effectively taking the risk off ICICI Banks books to that extent. IMGC is a joint venture between National Housing Bank (NHB), an RBI subsidiary which regulates home finance companies in India; NYSE-listed Genworth Financial, worldwide Finance Corporation (IFC) and Asian Development Bank (ADB). The fee for the guarantee, which will be around 1 per cent of the loan amount, will have to be paid by the borrower and will be built into the equated monthly instalments.

It is not clear how ICICI banks Extraa Home Loan will avoid the pitfalls of those over-leveraged property and multiple loans that led to the collapse of American banking system in 2008.

The facility will be suitable to largely middle-aged, salaried and self-employed individuals with seasonal income seeking home loans of a maximum amount of Rs 75 lakh. The borrower will have to pay a fee for the enhancement which would depend on the borrowers age and cash flow. Rajeev Sabharwal, executive director of ICICI Bank, said the product is aimed at people in the 35-45 years age group who are striving to buy a house but are not able to get loan for a sufficiently long tenure due to the retirement age.

Such loans will be available in four cities, Greater Mumbai, NCR, Bengaluru and Surat, at present.

The danger for the incremental quantity, above the utmost loan restrict, which the financial institution is prepared and allowed to lend, might be taken by the IMGC for which buyer pays, he stated, including that ICICI Bank wont share the burden.

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