The product will allow home buyers under Prime Minister’s flagship project to extend the loan term up to 30 years and also allows seven years te
NEW DELHI: India Mortgage Guarantee Corporation (IMGC), the country's first of its kind company, has launched a guarantee cover for Pradhan Mantri Awas Yojana (PMAY) to broaden the coverage of home loans with a lower level of risk on books of lenders.
The product will allow home buyers under Prime Minister’s flagship project to extend the loan term up to 30 years and also allows seven years term extension beyond retirement age. It will also enable lenders to offer loans to customers till they achieve the age of 75 years in some cases.
“This offering will be a strong enabler in helping achieve the larger vision of ‘Housing for All’ by 2022. Through this product, we will help bridge the demand gap in low income groups by increasing the credit flow," said Amitava Mehra, CEO, IMGC.
IMGC guarantees to cover the first loss up to 20% of outstanding principal balance, this entails paying of the outstanding equated monthly instalments (EMIs) when the account is a non-performing asset to the maximum coverage amount.
"Our aim was to come up with a proposition that supplements the interest subsidy that is being provided to the consumer and provide the necessary support to the lender making it a win-win proposition for both, the borrower and the lender.
IMGC will offer this product under a standardised program across lenders. The company currently has tie ups with two banks and four housing finance companies and has guaranteed over 10,000 retail loans across the country covering a cross section of borrowers.
The government has so far approved construction of over 16 lakh affordable houses under PMAY(Urban), with an investment of about Rs 90,000 crore, with a central assistance of about Rs 25,000 crore.
Mortgage guarantee, also known as mortgage insurance in some parts of the world, is a product which compensates banks and housing finance companies for losses that may arise when a home owner defaults on a home loan.
The product, if opted for with home loans, can help buyers increase affordability through a bigger loan.
NHB is the majority shareholder with 38% stake in IMGC, followed by US-based Genworth Financial with 36%. Asian Development Bank and International Finance Corporation have 13% stake each.