I applied for a home loan from SBI in the first week of June 2009 for Rs 30 lakhs. As advertised, the bank did not levy any processing fees, but charged Rs 2500 towards legal and valuation expenses.
At the time of loan application itself, I was told that the turnaround time would be about 3-4 weeks, despite my property being on the list of pre-approved properties of SBI.(It was a resale flat). The disbursement can take longer if there are problems encountered with CIBIL(credit bureau) records.
The home loan application form of SBI is rather lengthy compared to the forms at other private sector lenders. One should be prepared for this mentally and be careful to furnish all details and annexures(there is a checklist that is provided along with the loan application form, though) to avoid multiple iterations when the form is being processed.
The creation of the loan docket file itself took about a week, further to which the legal and valuation process commenced. In parallel, the residence and employment vertification was undertaken.The legal and valuation formalities took about a week - this was the total turnaround time from the day the property papers were scrutinised and the premises visited to the time it took for the opinion of the assessors and the lawyers reached the bank! And SBI has a central processing cell to process all back office work in a nodal office. So the loan applicant is called there to sign the legal documents like loan agreements, etc. This can easily take another week from the time the various reports like legal and valuation are done.
And finally the disbursement - SBI insists on all the margin money contributions to have been made to the seller and the money receipts to be handed over to them prior to the loan disbursement. Normally, almost all home purchase transactions will entail payment of an advance to the seller and on the day of registration, the remaining contribution from the buyer and the loan amount from the bank are exchanged with the property documents. Not with SBI.
And once the registration is done, the loan applicant needs to get the latest Encumberance Certificate(EC) from the Registrar’s Office and submit it to SBI. Subsequent to this process, SBI will create an equitable mortgage on the property in favour of the bank as collateral. This entails a fee of Rs 7000(I understand that this is a percentage of the registered value of the property) to the loan applicant. Only after all this is done, will the process be complete. I never saw this equitable mortgage fee being mentioned anywhere in the high decibel advertisements from SBI.
The good part about SBI home loan is the interest rates - for my loan, the interest rate for the first year is fixed at 8% and the subsequent two years is fixed at 9%. Rates would be on a floating basis from year 4 onwards, indexed to SBI’s benchmark rates. However, the interest rates for year 2 and year 3 have been brought down to 8.5% now. Also, the interest is calculated on a daily diminishing balance, i.e., the loan is set up as a overdraft account and one can keep depositing surplus funds into the loan account and therefore, the interest that one would pay would be less as the early payments would count towards prepayment of the principal outstanding balance.
The total fee that I paid is more than what most private banks charge - one can negotiate it to about 0.5% of the loan amount or about Rs 6000 including service tax and cess. Most corporate salary account holders should be able to get this kind of a deal from private banks. And, of course, the turnaround time assured by HDFC for the same loan for this deal was 1 week - from loan application to disbursement.
One should choose between convenience, turnaround time versus loan pricing. While private banks would score well on fees and turnaround time, SBI would be better on loan pricing and lack of pre payment penalties.Those looking for quick deal closures and less headaches would do well to go the private sector players, while those who can endure a longer wait can opt for SBI.