7th Pay Panel Impact: Banks Woo Govt Employees With Lucrative Home Loan Rates

Government employees have been a safe bet for banks for many years as far as loans are concerned, be it a car loans or credit card issuances. However, fewer home loans were disbursed, as remuneration in the government sector had been low and many government employees enjoy housing provided by the government. In most cases, government employees bought homes after retirement. This trend started changing when the Sixth Pay Commission recommendation were implemented, raising salaries of millions of government employees. This triggered a lot of real estate investment from government employees. Once the proposals of the recently unveiled Seventh Pay Commission are implemented, this segment may help revive the fortunes of the real estate sector in India to a great extent. 

Sensing the huge opportunity, banks are gearing up to supply cash. Getting a home loan is much easier for government employees. As they enjoy greater job stability, they are preferred recipients for any type of loan from banks.

PropGuide on how these special home loan schemes coupled with rise a in salaries will drive government employees to invest in real estate: 

The benefits

Central Bank of India, for example, offers government employees a floating home loan of up to Rs 75 lakh on its base rate of 10.25 per cent. If the loan amount is higher, the interest rate is 10.50 per cent. While the processing fee is fixed at 0.5 per cent of the total loan, the bank may waive the charge if you have a salary account here. Employees of central, state governments and public sector undertakings may also shift their home loan from other banks to Central Bank of India .

Under the State Bank of India's (SBI) Yuva Home Loan scheme, the borrower pays the interest rate on loans in the first three years; regular EMIs kick-start only after this period. This home loan is unique, as it provides 20 per cent higher amount than the normal home loan. This scheme is open to salaried government as well as private employees. To avail of this scheme, you have to be between 21 and 45 years of age.

Government lends a helping hand

State governments have also joined the mission to help their employees buy their sweet abodes. The Maharashtra government, for example, has announced to provide loan of Rs 20-50 lakh to those who have worked for at least five years with the state government. The West Bengal state government went a few steps ahead with its new scheme called Akanksha. Under the scheme, the state plans to provide free land to its employees in different parts of West Bengal. 

The Bihar government, on the other hand, has tied up with three banks where its employees can enjoy home loans up to Rs 30 lakh and the EMIs will be deducted from their salaries. Apart from this, the state also gives an option to its staff to avail of loan of Rs 7.5 lakh.