In a survey conducted with over 1200 homebuyers, NoBroker.com, India’s largest peer-to-peer real estate platform found that Loan to Value (LTV) is the biggest determinant for millennial homebuyers while deciding a lender for buying their first home.

As more and more companies have become habituated to employees working from home and many of them have adopted the hybrid model, millennials are closer than ever to realizing the importance of owning a home. Millennials now make up 63% of the homebuyers, up from 49% a year ago. NoBroker’s data already showed that Q1 2021 sales outperformed Q1 2020 by a good margin. Bangalore and Chennai have seen a jump of 41% and 47% respectively in sale transactions while Hyderabad has seen a jump of 52%. Mumbai and Pune are leading the sales with 86% and 83% more transactions than Q1 2020. Delhi-NCR too isn’t far behind with a 34% jump.

Affordable home loans due to historic low-interest rates and digital adoption in the loan application processing by the lender banks are catalyzing the trend along with attractive builder discounts and government initiatives.

Key findings from the survey:

 LTV (Loan-to-Value) and foreclosure charges are the most critical factors for deciding the lender bank for home loans, as per the survey. A higher LTV reduces the down payment amount and lowers (and in some cases nullifies) the foreclosure charges allowing the homebuyer the freedom to repay and finish off the loans earlier than the loan tenure. Historically, it is seen that most people end up repaying the loan amount within 8 years (lesser than the tenure amount).

Loan-to-Value (LTV) refers to the ratio of loan amount and value of the property. The higher the LTV, the higher is the % of the loan amount. This means a lower % of down-payment is required to shell out by the buyer. Another way to understand the advantage of higher LTV is that, for the same amount of money that buyer has to make down-payment, higher LTV allows the buyer to buy a bigger/higher-budget house. Millennials prefer this since it allows them to buy houses of their choice with their comparatively modest savings.

A home loan tenure of 10-15 years is the most preferred by 31% of respondents, followed by 24% of respondents preferring tenure of more than 10 years. About 65% of these millennials are in IT services while the rest are either self-employed or in government services.

In terms of tenure of loan, millennials’ preference for the tenure of 10-15 years is driven primarily by 2 factors: EMI to income ratio and interest payment on the loan amount. Longer tenure means lower absolute EMI for the homebuyers making it more affordable to millennials and gives them the flexibility to maintain a good lifestyle without sacrificing too much in EMIs.

Amit Agarwal, CEO, and co-founder of NoBroker.com commented, “The average age of buying a property has reduced and more and more millennials are buying their first homes. They prefer an LTV on the higher side as it enhances the overall ticket size of the purchase.  This is the reason that higher LTV has emerged as the most important factor for millennials in terms of choosing the home loan providers, apart from the interest rates. Even if the loan tenure is for 15-20 or even 30 years, most people end up paying off much sooner than the tenure. But as they are sensitive about foreclosure charges and EMIs eat into their current expenditures, they prefer a longer tenure to be able to enjoy a better lifestyle. Since they are early on in their careers, with salary increments, they are able to repay their loans faster than the chosen tenure. Therefore, good foreclosure terms are what they look for.”

Some private banks and NBFCs are offering LTV of more than 80% to reduce the burden of down payment. Banks have also launched hybrid products where home loans are supplemented with personal loans to help home buyers make the down payment.

While the LTV value is decided as per RBI guidelines (For Loans <=30 lakhs, max LTV = 90%; Loans > 30 lakhs and <=75 lakhs, max LTV is 80%; Loans>75 lakhs, max LTV is 75%), most private banks like HDFC, ICICI offer higher LTV based on higher Direct market value (DMV) rather than on sale consideration.

Suvidha home loan from Bank of Baroda provides an additional 5% of the sale consideration as a loan for registration expenses. Some lenders supplement the home loans with personal loans to ease the pressure of down payment or provide 15% of the home loan as a loan for Interior works of property purchased.

About NoBroker.com

NoBroker.com is a tech-based brokerage-free real estate platform that makes real estate transactions seamless and efficient. It is removing information asymmetry in the real estate sector in India with the use of cutting-edge technology and innovation. It participates in the entire user journey starting from the house search to packers & movers, home loans, home painting, and cleaning services, legal services, etc. With more than 1.25 crore registered users across Bangalore, Mumbai, Pune, Chennai, Hyderabad, and Delhi-NCR, it is the world’s largest P2P real estate platform. Founded by Akhil Gupta from IIT- Bombay, Amit Kumar Agarwal from IIT- Kanpur and IIM- Ahmedabad and Saurabh Garg from IIT – Bombay and IIM – Ahmedabad, NoBroker.com is steadily working towards streamlining India’s largely unorganized real estate industry. The platform has raised a total funding of $151 million from marquee investors such as General Atlantic, Tiger Global, Elevation Capital, Beenext, and KTB Ventures.

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Mumbai, 24 September 2019: Employees of Bank of Baroda, one of India’s most trusted public sector banks, have committed Rs 5 crore to the Chief Minister’s Relief Fund of state of Maharashtra. The contribution, which is a collection of funds from the employees, is towards relief work for the rehabilitation of cities and towns in the state that were recently impacted by floods.

About Bank of Baroda:

Bank of Baroda (“The Bank”) established on July 20, 1908, is a State-owned banking and financial services organization, headquartered in Vadodara (earlier known as Baroda) in Gujarat, India.

Bank of Baroda is India’s third-largest bank with a strong domestic presence supported by self- service channels. Bank’s distribution network includes 9,500+ branches, 13,400+ ATMs and 1,200+ self-service e-lobbies. The Bank has a significant international presence with a network of 100 branches/offices of subsidiaries, spanning 21 countries. The Bank has wholly-owned subsidiaries including BOB Financial Solutions Limited (erstwhile BOB Cards Ltd.), BOB Capital Markets and BOB Asset Management Co. Ltd. Bank of Baroda also has a joint venture for life insurance viz. India First Life Insurance. The Bank owns 98.57% in The Nainital Bank. The Bank has also sponsored three Regional Rural Banks namely Baroda Uttar Pradesh Gramin Bank, Baroda Rajasthan Gramin Bank, and Baroda Gujarat Gramin Bank.

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Pune, August 19, 2019: Bank of Baroda, India’s second-largest public sector lender, had initiated a unique consultation where 136 branches located in Pune City Region and Pune District Region (Pune Rural & Solapur) reviewed their performances, deliberated on issues before the banking sector and ideated on future strategy.

The consultations were held over a period of two days from August 18-19. The initiative was driven to seek ways and means available to increase credit to various sectors of the economy, enhance use of technology to bring about innovation and enable big data analytics and make banking citizen-centric as well as more responsive to the needs and aspirations of senior citizens, farmers, small industrialists, entrepreneurs, youth, students and women.

Thematic papers by domain experts on various challenges facing the banking sector were discussed during the meet with a view to suggest reforms in public sector banks (PSBs). The meet also reviewed the Bank’s performance and its alignment with national priorities in the areas such as credit support for economic growth, infrastructure / industry, farm sector and blue economy, Jal Shakti, MSME sector and Mudra loans, education loans, export credit, green economy, Swachh Bharat, financial inclusion and women empowerment, direct benefit transfers, less cash / digital economy, ease of living, alignment with local priorities and corporate social responsibility.

As a result of the initiative, a number of implementable and innovative suggestions have been arrived on how PSBs in general and our bank in particular, may improve their performance. The consultations for generation of ideas was conducted in a bottoms-up process, which will be further discussed at the SLBC / state level and final consultations will be held at the national level, to compare both, intra and inter-bank performances, for a way ahead implementation across PSBs.

The consultative process has resulted in a renewed sense of involvement and purposes down to the branch level and the Bank is geared towards implementing the roadmap for the future, improve its performance and align itself to national priorities so that it may fulfill its mandate of partnering the Indian growth story.

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