Canara Bank new Home Loan scheme. Does it make sense?
Canara Bank yesterday announced a new home loan scheme clearly marking a new high in the home loan battleground. As consumers are still not very enthusiastic on clearly targeted at the existing home loan consumers of other banks, it is not yet known whether Canara Bank will offer the new scheme to its own existing home loan borrowers.
The comparison charts for various loan slabs is given below:
Table A
Loan Tenures in all cases is 20 years
| Loan Amount – Rs. 5 lacs+ upto Rs. 30 lacs | LIC Housing Finance | Canara Bank/State bank  December Scheme | Canara Bank March Scheme | HDFC Limited | State Bank February Scheme |
| emi Per Lac | Rs. 884 | 916 | 930 | Rs. 949 | 961 |
| Interest Rate | 8.75% | 9.25% | 9.46% | 9.75% | 9.94% |
| Processing Fees | 0.50% – 1% | nil | nil | 0.50%-1% | nil |
| Comments | Floating | 5 years fixed and resettable thereafter. Only single owner and fresh purchase allowed. | 1st year -8.25% fixed for 1st year and next 4 years – 9.25% fixed & 2% below BPLR (minimum 10%) after that. | Floating | 8% fixed for 1st year and applicable floating rate thereafter. Current rate is 10.25% |
| Open for full/partial Disbursement till | till further notice | 30th June 2009 | 31st December 2009 | till further notice | 30th April 2009 |
| Pre-payment Charges | 2% | 2% | 2% | 3% | 2% |
| Comments | Free Life Insurance | Blended Interest rate and emi given above | Blended Interest rate and emi given above | ||
| Changes in Interest Rate/EMIs | can increase/decrease at any time | can increase/decrease after 5 years | can increase/decrease after 5 years | can increase/decrease at any time | can increase/decrease after 1 year |
| Eligibility calculated as per | first year emi | first year emi | Data Not Available | first year emi | Second year emi based on current applicable floating loan rates |
The scheme marked in yellow is good but available only for loans upto Rs. 20 lacs and the PSU banks are not really keen to push them as the scheme was announced under political pressure. So several barriers such as considering only a single person’s income for eligibility and allowing only one person as a borrower (even husband and wife are not allowed as co-borrowers thus preventing them from claiming tax benefits), very high margins (about 25% of the cost of the property) and lower eligibility for the same amount of income ensures that this is not available for most prospective borrowers. LIC Housing Finance continues to be the cheapest but the Canara Bank scheme is worth considering also since it offers fixed interest rates for the first 5 years. If at the end of the 5 years the interest rate is higher than what is available in the market you can always shift your loan to another lender. Clearly, HDFC is much better than the well-marketed 8% scheme from SBI.
| Loan Amount – Rs.30lacs+ upto Rs. 75 lacs | LIC Housing Finance | Canara Bank March Scheme | State Bank February Scheme | HDFC Limited |
| emi Per Lac | Rs. 949 | 962 | 990 | Rs. 1,015 |
| Interest Rate | 9.75% | 9.95% | 10.37% | 10.75% |
| Processing Fees | 0.50% – 1% | nil | nil | 0.50%-1% |
| Comments | Floating | 1st year -8.75% fixed for 1st year and next 4 years – 9.75% fixed & 1.50% below BPLR (minimum 10%) after that. | 8% fixed for 1st year and applicable floating rate thereafter. Current rate is 10.75% | Floating |
| Open for full/partial Disbursement till | till further notice | 31st December 2009 | 30th April 2009 | till further notice |
| Pre-payment Charges | 2% | 2% | 2% | 3% |
| Comments | Blended Interest rate and emi given above | Blended Interest rate and emi given above | ||
| Changes in Interest Rate/EMIs | can increase/decrease at any time | can increase/decrease after 5 years | can increase/decrease after 1 year | can increase/decrease at any time |
| Eligibility calculated as per | first year emi | Data Not Available | Second year EMI based on current applicable floating loan rates | first year EMI |
For loans greater than Rs. 30 lacs and upto Rs. 75 lacs, the scenario does not change much with the ranking order remaining more or less the same except that the State Bank scheme is cheaper than HDFC in this case.
Clearly, the home loan market is hotting up with promise of more goodies to come in the near future. With builders beginning to price a little more realistically, we should finally see some consumer interest come into this sector.
