The scheme is part of the newly-launched ‘Residential Builder Finance With Buyer Guarantee’ (RBBG) that seeks to safeguard homebuyers financially
State Bank of India (SBI) has launched a home buyer guarantee scheme under which the entire SBI home loan principal will be refunded to the borrower if the project developer fails the deadline. The unique benefit is part of the newly-launched ‘Residential Builder Finance With Buyer Guarantee’ (RBBG) that seeks to safeguard homebuyers financially.
So far, developer-led delays in a real estate project really leave home loan borrowers with no other option than joining hands with other homebuyers and seeking legal recourse in a consumer forum, a process which is painstakingly slow and largely ineffective in terms of protecting the financial investment.
In this backdrop, SBI’s Residential Builder Finance with Buyer Guarantee can be a safety net for home buyers. This is because the RBBG shields financially by issuing a guarantee for completion of projects to customers availing SBI Home Loans. Now, customers will be able to secure their investment in the ongoing home projects financed by the bank itself, SBI said.
RBBG will focus on affordable housing segment with a home price of upto Rs. 2.50 crore in seven Indian cities initially. Under this product, all reputed builders fulfilling the prescribed criteria by the bank can avail loan between Rs 50 crore to Rs 400 crore. Criteria include Star rating and CIBIL score.
Home loan borrowers please note that merely taking SBI home loan will not get you RBBG benefit. Your project developer first needs to take RBBG and then you have to avail SBI home loan for the real estate project.
If the real estate developer taking the RBBG scheme is unable to deliver the project within the deadline, the refund scheme will kick in for SBI home loan borrowers. The assured project delivery deadline becomes very important in the case of RRBG. Usually, developers take 3-5 years to deliver a project.
Rajnish Kumar, Chairman, SBI said, “We believe that RBBG will build confidence among home buyers by securing their hard-earned money and at the same time will boost under-stress real estate sector. Based on the response from both builders and customers, we may consider extending this product to other parts of the country.”
SBI commands 25% market share each in home loans and auto loans.
Anuj Puri, Chairman, ANAROCK Property Consultants said: “The underlying provision of this scheme – that the bank commits to refund the principal loan amount if a developer fails to complete the project – will ensure that SBI remains highly selective in its approach and work only with the most reliable and trustworthy developers”
To mitigate the risk of having to issue refunds, it will also keep a regular check on the progress of the project and see to it that it is completed on time. This will eventually give major assurance to all homebuyers who will apply for loans under this scheme from the SBI, and help in boosting their confidence, Puri opined.
Home loan borrowers may note that there may be conditions linked to the RBBG and the refund situation. RupeeIQ will go into details of the scheme and later write a follow up piece to help you have more clarity on the conditions attached to RBBG.
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