PNB Housing Finance 
Loan Against Property Interest Rates

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:

• 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 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

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 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 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.

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.

• 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