SBI to incentivize green home loan takers

SBI had earlier implemented a similar home loan scheme, but discontinued it in 2018, the person said seeking anonymity. (Mint)
SBI had earlier implemented a similar home loan scheme, but discontinued it in 2018, the person said seeking anonymity. (Mint)

Summary

  • SBI’s plan to reintroduce a green home loan product emphasizes the increasing demand for sustainable housing projects. mint

MUMBAI : State Bank of India (SBI) is looking to reintroduce a scheme that will encourage borrowers to buy units in green housing projects, offering them a 10-25 basis points (bps) discount on the prevailing interest rates, a person aware of the development said.

SBI had earlier implemented a similar home loan scheme, but discontinued it in 2018, the person said seeking anonymity.

In 2009-10, the state-owned lender launched the ‘SBI Green Home’ initiative to encourage developers build environment-friendly residential projects, as per the disclosures in its annual report for the financial year.

The proposed plan is to evaluate environmental, social, and corporate governance, or ESG-compliant builders, and offer them and homebuyers cheaper loans, he added.

The discount for retail customers will be on the spread the bank charges over and above its external benchmark-based lending rate, currently at 9.15%. “The bank will look at rating offered by Indian Green Building Council (IGBC) for this product. Builders following environment-friendly practices will benefit from this concession along with buyers looking for green homes," said the person cited above.

The IGBC’s new green building rating system considers several features like sustainable architecture and design, water conservation and energy efficiency, building materials and resources. According to IGBC, green projects could help save 20-30% electricity and 30-50% water.

In February, SBI concluded a syndicated social loan worth $1 billion, comprising $500 million in base amount and green shoe option of another $500 million, positioning it as a leading a commercial bank in Asia Pacific to secure the largest ESG loan. SBI’s plan to reintroduce a green home loan product emphasizes the increasing demand for sustainable housing development.

To be sure, SBI is not alone in urging consumers to embracing green buildings. Mortgage lender Housing Development Finance Corp (HDFC) raised a loan of $400 million from IFC (International Finance Corp) in December 2022. Similarly IIFL Home Finance signed a loan agreement of $68 million with Asian Development Bank (ADB) in February 2022. “The objective is to incentivize customers who differentiate between an environmentally compliant project and non-compliant builders," said the person cited above.

Industry associations too are advocating green home loans. In April, the Confederation of Real Estate Developers Association of India (Credai) entered into a partnership with IGBC, wherein Credai will build over 1,000 certified green projects over two years, and 4,000 projects by 2030. This, Credai said in a statement, will contribute over 400,000 additional housing units in the green development category.

Following sustained demand for housing units, after a slight dip earlier this year, mortgages have been one of most lucrative products for Indian banks. Customers had adopted a cautious wait-and-watch approach,but the optimism seems to have returned, said bankers.

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