For the payment of a small premium, the IMGC will guarantee repayment of 20% of the outstanding loan
The one-time premium will range from 0.9% to 1.5% of the loan and will have to be borne by the borrower and adjusted in the EMI
MUMBAI: LIC Housing Finance (LICHFL) is now offering home loans that can be repaid up to the age of 75. This follows a partnership between the housing finance company and India Mortgage Guarantee Corporation (IMGC), which provides insurance against defaults.
Speaking to TOI, LICHFL MD & CEO Vinay Sah said that the partnership with IMGC would enable the housing finance firm to provide long-term loans to borrowers who are not salaried. “It will also enable us to provide mortgages with higher loan-to-value ratios.”
For the payment of a small premium, the IMGC will guarantee repayment of 20% of the outstanding loan. At the least, it will be enough to cover six EMIs. This will give enough time to the lender to realise value from the house without losing any money. The one-time premium will range from 0.9% to 1.5% of the loan and will have to be borne by the borrower and adjusted in the EMI.
According to Sah, LICHFL will be able to increase market penetration as it will be able to accommodate more borrowers and ease restrictions on profile of applicants, who face rejection related to work profile, workplace and credit history, among other reasons that may be unspecified by lending institutions.
“We will also be able to tap into the large segment of employees working in SMEs, MSMEs, small entities and self-employed individuals. Through this, LICHFL would support the vision of ‘Housing for All by 2022’ of the government,” said Sah. LIC’s move to grow market share comes at a time when some private housing finance companies are experiencing stress due to the tightening liquidity. IMGC CEO Mahesh Misra said, “The housing finance industry is currently going through interesting times and large, stable lenders like LICHFL are ideally poised to leverage this opportunity. We are confident of scaling up this partnership significantly in a short time span.”
In addition to growing market share through lending, Sah said that LICHFL was looking at portfolio acquisition too. “We have looked at some portfolios, but the pricing was not right,” he said.
IMGC is a private company that is a four-way joint venture between National Housing Bank, Genworth Inc, International Finance Corporation and Asian Development Bank. The company provides mortgage default guarantee to lending institutions in India.