By
Natraj Muthukrishnan on 24 October, 2009, 11:22 am
Learning from the mistakes committed by bank on the other side of the globe, Indian banks are making the process of housing loan approval more stringent and tough. So be prepared to wait for more days to get your loan approved and you might end up not getting the amount of loan you have availed for.
Banks are rechecking the installment-to- income ratios (the figure that determines the EMI). Earlier, banks extended EMI (equated monthly installment) on the loan up to 50% of the monthly salary. Now, this installment to-income ratio stands between 30% and 50%. Added to this, with more and more companies cutting down on variable component and bonuses during the recession times, the banks have stopped considering these variable component as a source of income and are sanctioning loans based only on the fixed component of the salary.
This approach is taken by bank to improve their risk management and to avoid a credit crunch like situation. Though it seems to be a good move considering the long run, with the economy slowly getting back on its feet, the timing of this move is what baffles me. What do you think?
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All business industries have the emergent need of funding. And this task is much challenging. With regards to real estate markets, home buyers and sellers have had unsuccessful and unfinished deals due to the financing agencies’ fear of the credit crunch. Lending companies now establish many rigid standards on underwriting credit. Hence, it would be best to have the initial knowledge in avoiding credit crunches to fulfill real estate endeavors.