It is not easy to get a home loan. You must have the right job/profession, age, income, and creditworthiness to get a home loan. Many times, the lender is willing to offer you the loan but not the quantum you desire. And don’t pin the blame on lenders. The lenders have a reason to adhere to such strict lending norms. They don’t want defaults in their home loan portfolios.
What is a way to assuage such concerns of the lenders and help them widen their lending net? The lenders can tie-up with mortgage guarantee companies while offering such loans. Essentially, some of the risk of non-repayment is shared by the Mortgage guarantee company. We have discussed such a product from ICICI Bank (ICICI Bank Extraa Home Loan) in a previous post.
Piramal Capital Gruh Setu Home Loan
Piramal Capital & Housing Finance has launched a home loan product (Gruh Setu Home Loan) in tie-up with Indian Mortgage Guarantee Company (IGMC).
Piramal Capital has relaxed age and credit norms for its Gruh Setu Home Loan product. Therefore, you may be able to get home loans for longer than usual loan tenures. Moreover, at least a few borrowers who would otherwise not get a home loan, may get a home loan under this scheme.
Usually, the maximum loan tenure is such that your age at the time of loan completion does not exceed 60/65 years. With Piramal Capital Gruh Setu Home Loan product, you can pay the loan until the age of 70 years. If you are a pensioner, you can even avail a longer tenure until the age of 75 years.
The lender has relaxed credit norms too. If you work with a sole proprietorship or a partnership firm, even then you can get a loan of up to Rs 75 lacs. Even if you receive salary by cash, you can get a loan of up to Rs 20 lacs. The loan amount can go up to Rs 30 lacs if there is a co-applicant.
How Does a Longer Tenure Help?
It helps reduce the EMI amount. A Rs 50 lac home loan at 8% p.a. will have an EMI of
- Rs. 47,782 for loan tenure of 15 years
- Rs 41,822 for loan tenure of 20 years
- Rs 38,590 for loan tenure of 25 years
A longer tenure helps increase loan eligibility too. Say, you can pay an EMI of Rs 40,000. Interest rate of 8%. You will be eligible for a loan of
- Rs 41.85 lacs for loan tenure of 15 years
- Rs 47.82 lacs for loan tenure of 20 years
- Rs 51.82 lacs for loan tenure of 25 years
Piramal Gruh Setu Home Loan: Eligibility
- Minimum Age: 21 years
- Maximum Age (on completion of repayment tenure): 70 years (if non-pensionable), 75 years (if pensionable)
- Employment type: Govt. Institution, PSU, Private Sector companies, MNCs, Partnership firms, proprietorship concern (Individual/HUF), Institutions run by Trusts, NGOs, society.
- Documents needed: 2-year IT returns, KYC documents, Form 16, Bank statement for 6 months and salary slips, property papers
- Minimum Age: 21 years
- Maximum Age (on completion of repayment tenure): 70 years
- Professionals: Doctors, CAs and Architect
- Self-Employed Non-professionals, Business owners, Proprietorship, Partners of partnership firms and Promoters/directors of private and public limited companies.
- Documents needed: 2-year IT returns, Audited financials wherever applicable, KYC documents, Bank statement for 6 months and salary slips, property papers
What Role Does IGMC (India Mortgage Guarantee Corporation) Play?
The role is simple. If you can’t repay the loan, IGMC will pay the bank on your behalf. However, this does not absolve you from your repayment responsibility. The bank/IGMC will recover the amount from you eventually.
Some of the operational aspects are vague. For instance, it is not clear whether the entire loan amount is guaranteed by IGMC or only a portion of the loan is guaranteed. My understanding is that this should only be for a portion of the loan (and not the entire loan). Or else the premium will be quite high.
The cost (premium) of mortgage guarantee will likely be borne by the borrower but no such information is available on the product page of Piramal Capital website. Since the premium for IMGC is quite high, this may even be added to the home loan amount, or a separate loan given for that.
What Is the Rate of Interest?
As per their website, the interest rate for Piramal Gruh Setu Home Loan starts from 10.5% p.a (as of 25-Mar-2022). Compared to regular home loan products from other banks and HFCs, the loan interest rate seems on the higher side.
On the other hand, I checked the interest rate for a few other home loan products from Piramal Capital & Housing Finance, it was the same “Starting from 10.50% p.a.” for all the home loan products. “Starting from 10.5% p.a.” does not tell much. Difficult to make out from the website if this product is more expensive compared to other home loan products from Piramal Capital.
Given that the lender is relaxing the credit norms and age criteria for this product, I would expect the loan interest rate for Gruh Setu Home loan to be higher than regular products.
The processing fee for the home loan can be up to 3% of the loan amount + taxes. That is very expensive.
What Should You Do?
Not a cheap product by any stretch of imagination. If you can get a loan under a regular product from a bank or an HFC, try those options first. If you don’t get a loan (or not enough) at such places and must still buy a house to stay in, you can consider this option or other similar options.
Additional Reading: Piramal Capital and Housing Finance: Gruh Setu Home Loan