The interest rates for home loans have es calated at an alarm ing rate in the past year. From a single digit figure to a double digit hikes, this significant change is subject to various speculations by different people; declining deposits against increasing credits, sky-high imports, investments across borders, liquidity crunch and the notorious yet frequent political problems in the country.

According to the new policy put forth by Nepal Rastra Bank, the banks have been instructed to limit their investments in real estate to 25 per cent by the end of fiscal year 2012/13. Thus, most banks have temporarily discontinued home loan facilities along with other personal loans.
So what do consumers who want to build an ideal home, renovate our old house or purchase a plot of land do? What should a person do in order to obtain a home loan? Documents including Nepali citizenship, land ownership, blue print, and tax payment receipts are mandatory. What is just as crucial is one's repayment capacity. One has to be employed with a steady income source or in a business that shows a trend of increasing profits. The current scenario for both employment and business in the sector is bleak. With high interest rates and stagnant income, how does the picture fit?
There are a handful of banks who are offering home loans at this stage. Standard Chartered is one such bank offering the best bargain for customers seeking home loans amidst this crisis. "We offer loans at an interest rate of 14 per cent, which is the lowest rate currently available in the market for a tenure of five, 10 or 18 years," says Roshan Bikram Thapa, personal financial consultant of Standard Chartered Bank.

Before the central bank's directive was imposed, the rate was 6.9 per cent and has gradually increased due to the changing scenario. Besides the competitive rate, the bank also offers excellent customer services. Hence, its popularity among the general mass, even though it takes 30 days to sanction a loan from Standard Chartered these days, as opposed to the 14 days in the past. After approval of the loan, the money is at the customer's disposal within the allotted period. The bank endeavours to meet the increasing demands of its customers.

Nabil Bank--the bank that made most profits in 2009--is another bank offering home loans at an interest rate of 16 per cent. The bank offers a minimum loan of five lakhs but the sum could well go over a crore. Home loans are provided for house constructions, plot purchases, renovations and extensions and purchases of housings and apartments. After the loan is sanctioned, the bank pays 60 per cent of the total amount and 70 per cent of the total cost is provided for construction. `We are hoping for favourable changes in the future with increase in deposits, regulated imports and political stability. This will definitely help bring down the escalating interest rates," says Suresh Prasad Tripathi, head of personal lending at Nabil Bank.

Presently, other banks like Bank of Kathmandu and Nepal Investment Bank are not dispatching home loans. "We will resume our loan facilities soon. Nonetheless, we are providing additional loans for our existing clients under exceptional circumstances," says Anupa Rajbhandari, head of retail credit at Bank of Kathmandu.

Buying a house is the dream of many, but poor planning can turn that dream into a nightmare in a heartbeat! As many folks have found out the hard way: the best mortgage advice is knowing what to expect before you sign. It's fine to want the best home you can afford, but be certain that it is affordable. There are lots of sources for mortgage funds that are available and should be considered. Be certain to compare equal terms, down payments, and loan types. "We are hoping for favourable changes in the future with increase in deposits, regulated imports and political stability"

courtesy: The himalayan times