New eligibility norms mar low earning home buyers' dreams

Financing your dream home might just get tougher. With hardening home loan rates, banks are putting stringent mechanisms to check defaults. Bank of Baroda recently introduced a variable eligibility criterion for its home loans.

The eligibility for people earning above Rs 1 lakh per month has been increased from 60% to 70% making it possible for them to avail more loans than earlier. But for those earning below Rs 20,000 per month, the eligibility has been decreased from 60% to 50%.

Ajay Kumar, General Manager, Bank Of Baroda, said, “We want to ensure that they have enough money left for other expenses after paying their EMIs.”

Private banks, which already had differential eligibility criteria in place, are becoming more conservative in the amount of loans they disseminate.

Kotak Bank has reduced its loan to value ratio to 80-85% from 90%. A few months back, HDFC Bank reduced this ratio from 85% to 80% for most cases.

This means for a Rs 10 lakh home, you will now get loans up to Rs 8 lakh as against Rs 8.5 lakh earlier.

ICICI Bank has now become more conservative on property valuation for home loans.
 
Home loan rates have gone up by 3-4% during the last 18 months. With EMIs swelling and eligibility criteria declining, customers are losing out on both fronts.