Banks are gearing up to revive the process of loan against property owing to the rising demand for these loans.
In order to prevent the risk of over valuation, the banks have decided not to lend more than 50% of the value of the property at interest atleast 2-3 % higher than the normal home loan rates.
The major demand for such loans is presently coming from micro, small and medium entrepreneurs.
Mr R. Sampath, General Manager, Retail Banking, Bank of India, said: "We are reviving loan against property for our existing customers. These are businessmen whose annual turnover is in the range of Rs 30-40 lakh.
They usually don't have regular cash flows and may not have audited balance-sheets. In such cases, we go by their income-tax statements."
According to a senior SBI official, such loans are given for maximum period of three years as real estate prices fluctuate frequently and banks want to save themselves from that.
"The interest rates are slightly higher than home loan rates, but lower than unsecured personal loans, as in this case there is collateral," the official said.
Mr Uday Sareen, Head, Retail Banking, ING Vysya Bank, said: "Our loan against property is turning out to be one of our flagship products. About one third of our incremental home loans are loans against property. Even salaried professionals take loans against property."