With excess liquidity status, of late, banks and financial institutions (BFIs) have placed their priorities on home loans. Marred by acute liquidity crunch few years back, these BFIs had hiked the interest rate on home loans from 10 per cent to 16 per cent, which had largely discouraged people to build or buy houses. However, as BFIs reached their comfort zone, the interest rate on home loans has fall to a mere nine per cent. Moreover, the extension of ceiling for home loans up to Rs 10 million has also opened the door for those who are opting to build or buy a house of their own.

“Our lending on home loans has exceeded Rs 550 million compared to the corresponding lending of last year,“ said Krishna Shrestha, deputy general manager at Nepal Bank Limited (NBL).
According to him, they had issued Rs 1.89 billion home loans in last fiscal year while they have already lent Rs 2.44 billion for home loans till mid-January this year. NBL offers home loans for five to 15 years time frame on an interest rate ranging from 10 to 11 per cent. “The interest rate is fallen by 0.5 per cent from last year,“ informed Shrestha. Stating that they are focusing on home loans rather than real estate, he said, “We provide loans for purchasing, renovating, constructing homes analysing the income source of the borrowers.“

“We thoroughly observe the location of the land where the house is to be built before sanctioning the loan,“ said Shrestha, adding that borrowers for urban areas have a greater chance to get loans than those in rural area.
According to NBL, they will sanction the loan within seven days of application presented at the bank with complete documents. The minimum amount the bank lends under home loan is Rs 500,000.

Banks feel safe to invest in home loans as they provide loans to regular income groups who can pay back the debt on time. The provision for application defers with each bank. Usually, home loan seekers have to have a gross monthly income or be self-employed or a salaried professional or other income along with that of his/her spouse or other family members that is double the monthly installment of the loan.
Moreover, the age of applicant should not be over 60 years. As market competition gets tough, many banks have been providing prompt service, flexible loan tenures, and other features to attract the customers.

Stating that they are prioritising home loans and business loans, Niraj Timalsina, acting senior officer at United Finance Limited, said, “The status of home loans is encouraging.“ He further added, “We sanction both equity loans and loans based on EMI for 10 to 15 years as per the convenience of borrowers.“ The interest rate for home loans at the finance company ranges from 13 to 16 per cent.
Stating that there is a tough competition, he said, “We try our best to satisfy our customers with quality service.“

As per Nepal Rastra Bank, exposure to home loans constitute Rs 76.14 billion till mid-January 2014 as compared to the same period last year which remained at Rs 57.15 billion. However, real estate loans dipped from Rs 90.91 billion in mid-January 2013 to Rs 83.50 billion till midJanuary 2014. Meanwhile, Rajan Singh Bhandari, president of Nepal Bankers Association, said, “Banks have been experiencing a growing trend in the issuance of home loans,“ adding, “We are expecting it to grow even higher in days to come.“

source: the himalayan times,15 March 2014