Best time to take a home loan


With low economic activities and excess liquidity, banks and financial institutions (BFIs) have come up with easy home loan schemes to allure customers. BFIs are now offering home loans as low as 6.49 per cent interest rate. Various banks have already introduced schemes for house and land purchase, construction, repair, renovation and reconstruction of houses with refinancing services.

NIC Asia offers probably the lowest home loan interest rates at 6.49 per cent which is valid till limited period. NMB Bank has its ‘saral ghar karja yojana’ starting at 6.66 per cent interest rate with maximum repayment tenure of 25 years. Machhapuchre Bank is offering a home loan scheme at 7.5 per cent.

“To mobilise the contracted market after the earthquake and to manage excess liquidity, we have introduced easy home loan schemes,” informed Upendra Poudyal, CEO of NMB Bank, adding that they have maximised the loan tenure up to 25 years for easy repayment. Citing that they are enjoying a good response from customers, Poudyal said, “We are overwhelmed by inquiries and queries from customers. However, it will certainly take five to six months before these inquiries translate into transactions.”

According to him, investment in home loans is a secure venture as the institution conducts proper evaluation of income source of the applicants along with property valuation before sanctioning loans.

People in the regular income group who can repay the debt are eligible to apply for the loan. The minimum amount that the bank credits is Rs 500,000 up to Rs 10 million as per the valuation of the property. Interest rates are based on floating market and subject to change. However, bankers assume that the interest rate will not change at least for this fiscal. For the competitive market, BFIs have also announced maximum loan tenure with prompt process that can be finalised within five working days after providing all required documents. Both equity based and EMI based loans are available for the convenience of customers with administration charge less than one per cent.

“The market response from genuine customers is exciting. As compared to normal days before introducing the scheme, inquiries now have increased by three folds,” said Prabin Basnet, Head Retail Banking at NIC Asia. He said that majority of inquiries are for equity finance rather than for construction because of the unclear policy.

According to Basnet, they have introduced the scheme at special rates to relief customers from the burden of interest rate, who are holding their construction projects or property purchase due to economical blockade and the earthquake. The bank is providing loan starting from Rs 2.5 million up to Rs 10 million.

Nepal Rastra Bank (NRB) Governor Dr Chiranjibi Nepal said that BFIs gradually dipping interest rates for home loans is the need of the hour to mobilise and use excess liquidity. He also stated that it is a good opportunity for end-users to invest in housing sector.

With a view to assist earthquake victims, NRB introduced provisions of refinance facility at zero per cent interest rate in May 2015 to BFIs. BFIs were to provide loans to victims at as low as two per cent interest rate. In this regard, Nepal said, “NRB is planning to implement these provisions strictly as nominal earthquake victims are getting concessional housing loans.” He also stated that BFIs are reluctant to provide concessional loans as they will get nominal margins.

Poudyal who is also the President of Nepal Bankers Association, how-ever, said that banking institutions have a few applications from earthquake victims for claiming housing loans. He said, “This may be because many damaged houses have not been demolished yet. And the whole government process to get approval for constructing a house is delayed. Moreover, many applicants don’t have regular income source which might be preventing them from

applying for the loans.”

NRB has capped exposure of lending in home loans to 25 per cent in the real estate sector of the total credit disbursement. As per data at NRB, the credit flow of BFIs amounted to Rs 218.90 billion (including Rs 125.28 billion residential home loans less than Rs 10 million each) till mid- January 2016, which constitutes 15.2 per cent of total credit exposure of BFIs.

Gaurav Ratna Sthapit, Business Advisor at Civil Homes said, “Demand and transactions were disturbed significantly for a few months after the earthquake but gradually the demand has grown with the necessity of living in secured houses.” Citing that financing service with low interest rates have also boosted inquiries, he said, “People now are looking for secure buildings with all the facilities which they can find in developers projects. Also we now have customers who tend to cash in on the opportunity of low interest rates investing in property.”