PNB Housing Finance Loan Against Property Interest Rates

PNB housing finance LAP interest rate starts at 8.90 % for up to 15 years. Apply for PNB Loan against property online for quick approval & disbursal. You can avail doorstep delivery of PNB LAP up to 65% of property value for a range of personal & business needs pledging a residential or commercial property.

About PNB Housing Loan Against Property

PNB Housing is a subsidiary of one of the largest nationalised banks in India, Punjab National Bank. Having commenced its activities on November 11, 1988, PNB Housing offers a range of exciting products like loan against property, fixed deposits, home loans, and so on.

Though known for its housing loans, the company offers a variety of non-home loans, as well. They include the following facilities:

Loan ProductIdeal forMaximum  LoanInterest RateMaximum tenure
Commercial Property LoanPurchasing commercial properties like shops70% of the price of the property10.25% to 10.75%15 years
Loan Against PropertyMeet individual and business needs60% of the property value10.25% to 11.75%20 years
Lease Rental DiscountingLoan against rent receivables80% of the future rent receivable10.25% to 10.75%120 months
Loans for Real Estate DevelopersFinance to real estate developers for constructing apartment complexesNeed-basedNATo be liquidated on the purchase of the flats

Features Provided by PNB Housing Finance LAP

  • Meet the individual and business needs of its customers
  • Attractive rates of interest
  • Relaxed eligibility norms
  • Simplified documentation formalities
  • Extended repayment tenures up to 20 years
  • Loan available up to 60% of the value of the property

PNB Housing Loan Against Property Interest Rate

PNB Housing offers floating rates of interest that are linked to its benchmark rate, PNBHFR. The rates change whenever the company varies the benchmark rate.

The individual rates of interest on the Loan Against Property depend on the following factors:

  • The amount of loan
  • The occupation of the borrower
  • The credit rating of the borrower
  • The nature of the property

PNB Housing does not offer loans against the property on a fixed-rate of interest basis.

PNB Housing Loan Against Property - Interest Rate Structure

Loan Against PropertyRate of Interest
Loans Against Commercial Property10.50% to 11.00%
Loans Against Residential Property10.25% to 10.75%
Loan Against Plot - Residential or Commercial11.25% to 11.75%

Points to Note

  • PNB Housing offers a floating rate of interest on its Loan Against Property
  • The rate of interest on a loan against commercial property is higher than that of a loan against residential property.
  • PNB Housing offers loans against residential and commercial plots
  • The rate of interest on loans against plots is the highest among all the loans against property variants.
  • The interest rate is in a range because it depends on the credit rating of the borrower

PNB Housing Loan Against Property - Repayment Mode

PNB Housing offers Loan Against Property in the form of a term loan with a repayment tenure extending up to 20 years. The ideal mode of repayment for such a loan is the EMI.

The EMI is a constant quantity for a given loan amount, rate of interest, and tenure. The EMI has two components, the principal repayment, and an interest repayment component. As the EMI remains constant, the value of the interest and principal repayment component changes every month. In the initial stages, the interest component is more. As you go deep into the tenure, the interest component keeps reducing with a corresponding increase in the principal repayment component.

PNB Housing Loan Against Property - Benefits of the Floating Rate of Interest

PNB Housing offers the floating rate of interest on its Loan Against Property. The floating rate of interest has its positive aspects when compared to the fixed-rate structure.

  • The floating rate connects with an external benchmark rate. In this case, the rate of interest on the Loan Against Property is linked with the PNBHFR. This rate depends on market forces. As the market rates swing, PNB Housing varies its benchmark rate, thereby affecting the individual rate on Loan Against Property.
  • The floating rate is the ideal one in a stable market where there are not many fluctuations. The customer can enjoy the benefits of the downward swings in the market rate.
  • In the fixed-rate structure, the rate remains fixed irrespective of the variation in the market rates. Such a rate can be beneficial when there are extreme swings in market rates. Otherwise, a fixed-rate structure is not advantageous because the contracted rate will always be higher than the corresponding floating rate structure.
  • If the market rates go down, the benefits are passed on to the customer in the floating rate structure. It results in a lowering of the EMI or the repayment tenure.

PNB Housing Loan Against Property - Comparison with Housing Loan

The Loan Against Property is similar to a housing loan in many respects:

  • The security for the Loan Against Property and the housing loan is the equitable mortgage of property.
  • n the case of a home loan, the property offered as security is the asset created out of bank finance. Hence, it is referred to as prime security.
  • In the case of a Loan Against Property, the security is the mortgage of an existing property. Hence, it is termed as collateral.

There are specific distinctions as well between the two products:

  • The purpose of a housing loan is to purchase or construct a house/flat
  • The Loan Against Property is different because the purpose is to meet individual and business expenses.

As the end-use of the funds is not established, the banks and NBFCs consider the Loan Against Property as riskier when compared to a home loan. Therefore:

  • The rate of interest on a home loan is always less than that of a Loan Against Property
  • The LTV ratio in the case of a Loan Against Property is higher than the home loan.

The Loan Against Property is more like a personal loan but with collateral. Therefore, the rate of interest on the Loan Against Property is less when compared to a personal loan.

PNB Housing Loan Against Property - Comparison with Personal Loan

  • The purpose of availing a personal loan is similar to that of a Loan Against Property
  • The only difference is in the quantum of the loan and the loan tenure
  • As the Loan Against Property is a secured facility, the rate of interest is lower in comparison

Preapproved ICICI loan against property @8.35% p.a 

ICICI bank loan against property up to 5 crore can be availed of online as well as offline by salaried and self-employed applicants. The LAP can be for applied for business expansion, long term working capital, debt consolidation, equipment purchase, medical exigency, education/ marriage of children, holiday and much more. Higher loan amounts are available for select customers. 

FAQs

What benchmark rate does PNB Housing Ltd follow when determining the interest rate on Loan Against Property?

PNB Housing is an NBFC. Hence, it does not follow the repo rate or the MCLR that commercial banks do when determining their interest rate on retail loans. PNB Housing refers to its Prime Lending Rate for Non-Housing purposes, PNBHFR. This rate is linked to market forces that determine its rise of fall at frequent intervals. Various other aspects also go towards determining this lending rate.

What factors define the individual rate of interest of loans against property?

The individual rate of interest on loans against property depends on the following factors:

  • The nature of security offered: The rates for commercial property are different when compared to residential property. Similarly, the rates for loans against residential/commercial plots are also different when compared to fully-constructed properties.
  • The credit rating of the borrower: Generally, the higher the credit score better is the rate of interest.
  • The occupation of the borrower: Usually, salaried employees are considered safer when compared to non-salaried self-employed individuals.

In the case of an interest rate variation, what is the better option for a borrower, increase the EMI or the tenure?

The beneficial option is always to increase the EMI whenever the rate of interest goes up. The EMI comprises of an interest repayment component and principal repayment component. As the interest rate goes up, the interest repayment component also increases. Therefore, the principal repayment portion will decrease if you keep the EMI constant. It will cause a cascading effect on the interest calculation for the following months. Therefore, it is better to increase the principal repayment component, as well, thereby increasing the EMI.

How does PNB Housing treat the EMI under such circumstances?

PNB Housing has two options before it. One is to increase the EMI depending on the rise in the interest rate. It entails keeping the repayment tenures as constant. The alternative is to keep the EMI constant, thereby increasing the mandate. In the initial stages of the loan, PNB Housing prefers to keep the EMI constant. However, they cannot increase the tenure beyond a specific level. Therefore, increasing the EMI remains the only option.

What are the different modes of repayment allowed in a PNB Housing Loan Against Property?

The ideal way to repay a PNB Housing Loan Against Property is the EMI mode. The borrower can either submit post-dated cheques or register for an ECS mandate for paying the EMIs. 

Does PNB Housing inform the borrower whenever there is a variation in the interest rate?

Yes, RBI has made it mandatory for all financial institutions to inform their customers about the changes in the loan terms and conditions. The difference in the interest rate can cause the EMI to vary. Therefore, the borrower should be aware of the variations. PNB Housing can use various methods to inform the borrowers. It can be through email, SMS, or by way of a simple letter.

Can the borrower know in advance what the prospective EMI of the Loan Against Property will be?

Yes, PNB Housing offers the facility of the EMI calculator that helps to calculate the EMI in advance. It helps the borrower to understand the financial liability and also maintains his/her to ascertain the affordability, as well.

How does PNB Housing calculate interest on Loan Against Property?

NB Housing calculates interest on the monthly reducing method. This method works out in the following way. This example will help you understand the concept.

The interest for November is calculated on the outstanding balance as of the last day of October. Similarly, the outstanding balance on the last day of November is the base for calculating the interest for December.

Is this method beneficial to the borrower?

In a way, it does not benefit the borrower. This calculation envisages that it does not calculate the interest benefit for the instalment you deposit during the month. In the regular course, the EMI is payable by the 10th of the month. Therefore, the borrower loses out on the interest benefit on the EMI amount for an average of 20 days every month. Over the entire loan tenure, it can snowball into a substantial figure.

Is this method different from what commercial banks use?

Yes, commercial banks calculate interest on daily reducing balances. This method offers the highest benefit to the borrowers. It is a more transparent mode of calculating interest.