The slowdown in India's economy coupled with regulatory changes has had its impact on housing demand. Now, the country's largest lender, State Bank of India, is launching a new product, guaranteeing refund of principal amount to customers who avail home loan from the SBI in case the project gets stuck, in the hope to attract more buyers to the market.
The new scheme 'Residential Builder Finance with Buyer Guarantee' aims to safeguard buyers financially.
In the recent years, there have been cases where a few developers faced a financial crunch and gone bankrupt, leaving buyers who had invested in these projects in the lurch. Not only customers in such projects didn't get their houses on time, but their money was also stuck in unfinished projects.
Now, customers will be able to secure their investment in ongoing projects. The key is that the home loan will have to be availed from SBI and the project will also have to be funded by the lender.
The scheme will focus on homes priced up to Rs 2.50 crore, initially in seven cities, in due course expanding to 10 cities.
The developers, who will be selected following due diligence can avail loans between Rs 50 crore and Rs 400 crore.
So, if one has invested in such a SBI approved and funded project, and also the customer has availed home loan from SBI, if the project gets stuck beyond timelines provided under RERA (Real Estate Regulation and Development Act), the customers will have the option to get the principal amount invested refunded by the SBI.
"We are making an arrangement with select builders. State Bank is committing that till OC (occupation certificate) is given, there will be a guarantee, which will be offered to the buyers who take home loans from SBI," said Rajnish Kumar, chairman of SBI.
In this way, at least some money of the customer will be protected.
Data released by real estate consultants Knight Frank showed that housing sales in top eight cities in India rose just one per cent in 2019. However, sales in Mumbai fell five per cent.
Kumar hopes the scheme launched on Wednesday will help increase velocity of sales. "There is a need to revive confidence among home buyers. To revive the confidence, we have taken this initiative," he said.
On Wednesday, SBI inked an memorandum of understanding with Suntek Realty, under which the Mumbai-based developer will launch three projects where this scheme will be applicable. The lender hopes to ink similar deals with other reputed, financially stable developers.