SBI announces new buyer guarantee scheme to revive real estate sector
The SBI will refund the entire principal amount if the home developer fails to deliver the project within the assured deadline.
The State of Bank of India launched a 'residential builder finance with buyer guarantee' scheme to revive the Indian real estate sector on January 8, 2020.
Under the scheme, the largest public sector bank will issue a guarantee for completion of select residential projects to customers availing home loans from it.
According to SBI Chairman Rajnish Kumar, the scheme will create a win-win situation for builders, homebuyers and the bank alike.
SBI’s new buyer guarantee scheme: Key Facts
• The buyer guarantee scheme will focus on affordable housing projects worth up to Rs 2.5 crore in 10 cities initially.
• Under the scheme, the SBI will refund the entire principal amount if the home developer fails to deliver the project within the assured deadline.
• The bank will issue the guarantee until the housing project gets the occupation certificate (OC). The refund scheme will only be valid until then.
• Further, the guarantee will only be available for RERA registered projects and they will be considered stuck only after they cross the RERA deadline.
• The developer fulfilling due diligence by the bank will also be able to avail loans between Rs 50 crores to Rs 400 crores under the scheme.
The guarantee scheme will improve homebuyers' confidence in residential builders and give a boost to residential sales. The move will provide a much-needed boost to the real estate sector.
The launch of the new guarantee scheme follows several efforts made previously to revive the struggling real estate sector.
The central government had announced the setting up of an alternative investment fund (AIF) worth Rs 25,000 crore in November 2019, which was aimed at providing relief to real estate builders with unfinished projects to ensure timely delivery of residences to the buyers.
The SBI also recently reduced its external benchmark rate by 25 basis points to 7.8 percent. New home loan borrowers can avail mortgage at 7.9 percent in comparison to earlier 8.15 percent. The public sector lender has a 22 percent market share in home loans.