We have reviewed many home loan products on this blog. However, most of those loan products were for established self-employed professionals and salaried individuals working with Government Organizations or established corporates. However, the desire to own a home is much deep rooted and almost everyone wants to own a house. And most need a home loan to purchase the house.
Let’s discuss a loan product that targets customers beyond the formal established sector. In this post, I will discuss PNB Housing Unnati Home Loan Scheme. This loan product is targeted at lower and middle income segments in Tier II and Tier III cities and the periphery of Tier I cities. Employees of smaller establishments can also avail this loan facility. Let’s find out more about this product.
PNB Housing Unnati Scheme: Salient Features
- Maximum Loan Amount of Rs 25 lacs subject to a maximum of 90% of the property value
- Self-employed borrowers can get loan up to 67% of the property value
- Loan Tenure of up to 30 years
- Loan available in both fixed rate and floating rate options
- Fixed rate can be 3, 5 and 10 years. Subsequently, the loan will automatically become a floating rate loan
- You can expect the interest rates for his loan to be slightly higher. You can check the latest loan rates here
- As with other home loans, the housing finance company shall take first charge by way of equitable mortgage over the property. The HFC may also ask for additional security, if needed
You are eligible for the loan if:
- You must have a professional degree/Diploma/Post-Graduate degree/ITI etc.
- You must be employee of a local and stable business entity such as petrol pump, restaurant, jewelry shops, garment shops etc.
- You have minimum monthly income of Rs 10,000. This limit applies to combined income in case there is a joint applicant
Additionally, your age at the time of loan maturity shouldn’t exceed 70 years if you are salaried employee. On the other hand, if you are a self-employed professional/non-professional, the age at loan maturity should not exceed 65 years. You can check the detailed loan criteria here.
On the PNB Housing website, it is mentioned that the loan eligibility will be determined taking age, qualification, income and occupation of the applicant. Clearly, your repayment ability will come into picture. Even though the minimum income is Rs 10,000 and the maximum loan amount is Rs 25 lacs, you need to have practical expectations about your home loan eligibility.
For instance, a loan of 25 lacs at 8.5% p.a. for 30 years requires a monthly EMI of Rs 19,222. At Fixed Obligations to Income Ratio (FOIR) of 50%, your monthly income should be ~ Rs 38,000. This is way more than Rs 10,000 per month. Clearly, if your income is lower, the loan eligibility will also be lower.
Author’s Note: I have relied on the information available on PNB Housing website. It is possible that the bank considers various unwritten rules during the loan sanction process.
What Is Noteworthy in This Product?
Well, you would expect these features in any loan product that targets lower and middle income groups. By keeping the minimum income low At Rs 10,000 per month, the HFC has brought many prospects into eligibility fold. The maximum tenure is high at 30 years to keep the EMIs low and increase loan eligibility.
Fixed rate option is available up to 10 years so that borrowers can be protected from interest rate fluctuations. This protection is something that a lower or middle income group person may need. For a low income group person, non-discretionary expenses as a percentage of monthly income may be quite high. Such borrowers may find it difficult to manage wild fluctuations in EMIs (as compared to borrowers in the high income group). Please understand that I am not advocating the fixed rate option for this loan product. I am merely saying that it can be useful.
How Does the PNB Housing Finance Unnati Scheme Fare against Other Products?
All the products targeted at these income groups will have similar features. Some may have higher maximum loan amount. However, as we have seen in a earlier section, a higher maximum loan amount may not make as much sense. There could be some difference in eligibility criteria. I pick up a similar product from Axis Bank.
|Features||PNB Housing Unnati Scheme||Axis Bank Asha Home Loan|
|Maximum Loan Amount||25 lacs||20-28 lacs, depending on the location|
|Loan as % of Property value||Up to 90% for salaried, 67% for self-employed||Up to 85% of the property value|
|Maximum Loan Tenure||30 years||30 years|
|EMI Waiver||No||Yes, subject to conditions|
|Minimum Monthly Income||10,000||8,000-10,000 depending on the location|
As expected, not much difference.
Additional Point to Note
It is possible that your loan qualifies for credit linked loan subsidy under Pradhan Mantri Awaas Yojana (PMAY). Do check out the eligibility and the process while applying for the loan.
PNB Housing, on the loan page, suggests that you get your property and loan repayments insured. Noble thought indeed. Most banks/HFCs insist on purchasing life insurance for the loan amount. This ensures that, in the event of your demise, the money from the life insurance policy can be used to square off the loan. However, there is no need to purchase such life insurance from the bank itself. You must avoid purchasing from the bank. Purchase directly from the insurer and get the policy assigned to the bank. You will save a lot of money. I have covered this aspect in another post.
PNB has also tied up with Bajaj Allianz and ICICI Lombard to provide you such coverage. I don’t know whether PNB Housing has tied up whether Bajaj Allianz General Insurance or Bajaj Allianz Life. However, I know that ICICI Lombard is not a life insurance company. It is a general insurance company and does not sell pure life insurance. Therefore, quite possible you will be asked to purchase ICICI Lombard Home Safe Plus Product. This is an utterly useless product and does not cover natural death. How bizarre for a loan insurance product? I have reviewed the product in detail in an earlier post. I am not suggesting that you should go with Bajaj Allianz product. All I am saying is that you should understand the insurance product completely before signing the dotted line. To earn commissions, the HFC may push any product. It is your responsibility to purchase the product you need. Always better to purchase directly from a life insurance company. Given this product is targeted towards the low income groups (which may otherwise not find it easy to get a home loan), it remains to be seen how willing the housing finance company officials are in negotiating this.