What you don’t know about housing loans in India – Part 2

I was in India looking for a home and I consulted Canara bank for a loan since my brother had availed a loan from them. They instantly pre-approved me for a 85% loan of upto Rs. 50 lakhs. This means I will pay 15% of the money down and the rest of the money will be covered by a bank loan not exceeding 50 lakhs. Although 50 lakhs was what I requested, I was told that for an NRI, a loan of upto 1 crore was easily possible. I identified a house that I wanted to buy. I decided to take the Canara bank loan, but the builder who was going to sell the property to me would not entertain it. When I dug deeper, I came to know that the builder prefers loans from ICICI bank since they remit the loan amount quicker and will remit the full loan amount directly to the builder even when the property is 70 to 80% complete. He told me that the Nationalized banks will make partial payments proportional to percentage of completion of the building. I suspect if there are deals between banks and builders. The builder probably gets a cut out of the whole deal. I would like to know if others have heard anything in this regard. The builder actually pushed me to take 90% loan instead of 85% and ICICI actually gives out 90% loan. I was in a hurry and did not want to let go of the house, since that was only unit left in the location. So I agreed to go with the ICICI loan. After the fact, a year after getting the loan I feel I should have stuck with a Nationalized bank. My personal opinion is that if you have people back home (example: Parents) who can operate your account, you are better off going with a Nationalized bank. Although things happen at a slower pace at the nationalized banks, you can approach the manager of the branch anytime. They will spend the time talking to you. You can get statements anytime. You would be surprised how difficult it is to get any statement from bank like ICICI after the loan has been issued. You can never get into an ICICI office to speak to any official about your loan. A front office person will ask you to fill a form and tell you that they will contact you or send you the relevant statements. But nothing happens. On the other hand, for my brothers loan, my dad can walk into Canara bank, directly go and talk to the manager and get what he needs. Coming next in part 3: “Getting you hooked”.