View Full Version : govt hba vs loan from outside

22-03-2009, 01:10 PM
dear members

may i request the fora to kindly guide me regarding the housing laon.


i am sure senior members would have definitely faced such dilemmas and hence would request them to post link, worksheet, material etc that can help youngsters like us to make a wiser decision.

22-03-2009, 06:30 PM
Dear Kailash Bansalji,

The major difference between the Bank Loan and HBA is the way the interest payable is computed rather than the rate of interest. To keep the ball rolling, same is given below:

1. HBA: After disbursing the loan and commencement of the recovery in Monthly Instalments as per sanction Order, the reduced Interest Bearing Balance is computed on montly basis on which interest to be repaid will be calculated. The computation of interest is identical to GPF interest calculation; the difference being in GPF the balance will go on increasing while HBA same will go on decreasing; a function of GPF contribution and HBA recovery instalment respectively.

INterest thus payable, based on IBB, will be recovered after complete recovery of HBA amount. NO INTEREST IS LEVIED ON THE INTEREST AT ALL (unlike bank loans).

2. House Loan from Banks: Computation of interest and recovery of principal and interest is on EMI method: Equated Monthly Instalments. EMI, a constant figure, will have two components, princial and interest. Total of EMI will include loan amount and the total interest accrued. In this method the borrower has to pay interest on interest due also. EMI is so structered that in the first month of repayment the interest component will be maximum while the principal component will be least, while it is reverse in the last month of recovery! It also means, in the middle month, the interest component and the principal component will be equal.

More will follow:


22-03-2009, 08:56 PM
dear sir
its very confusing.... may i request for a small example of taking rs 1 lakh on both accounts.
further i also searched on the net regarding the formula for both and i am getting more mixed up.
at the end it is pertinent to know which is more beneficial given all factors same.... ie length of year of service, repayment capacity etc etc same.
kailash :(

22-03-2009, 09:33 PM
Dear Kailashbansalji,

UNDOUBTEDLY H B A! I shall provide more information with formula and eg of 1 lakh for a fixed duration .....


22-03-2009, 09:36 PM
Dear friend
Apart from what my learned friend explained, the basic difference is that only HBA principal amount is deducted in first 15 years. Suppose you take 1 lakh loan as HBA, you will pay about 560 p.m. On the other hand it will be around 1200/- if taken a loan from bank since it also includes interest portion. By this you may get a little more scope for arranging more fund in total EMI you ought to pay. Say you took 7.5 lakh from HBA, you will pay about 3700/-p.m. and the balance amount you could arrange from Bank without reducing your eligibility much. Moreover HBA is safe and there is no prepayment penalty. This is definitely beneficial even if you have to pay a little more as interest. You can first take HBA and then second mortgage from any nationalized bank. Go for it.

24-03-2009, 09:08 AM

HBA is cheaper than Bank Loan. I will note some personal info:

I had taken Rs. 3,00,000/- in Sept.2000. The monthly repayment of principal commenced from Sept 2000 itself @ Rs. 1666 pm for 179 installments and Rs. 1786 for 180th installment. So the repayment of the principal will be completed in 15 years in a leisurely pace, without me knowing the pinch.

The repayment of interest will start from 15th year to 20th year (60 installments). The interest is at an effective rate of 11%. You have to do some trivial things like insuring the house against fire, lightning, earthquake etc to get this interest rate

The interest on my loan is deducted from 15th year to 20th year and the same would be around Rs. 5000/- per month. So in my case, the interest will start from 2015 till 2020. Inflation and pay hike will erode the money value. The total repayment over 20years for Rs.3,00,000/- amount to around Rs.6,00,000/- approx

In the case of State Bank of India an EMI calculator is available in their site.


As per the said site, a bank loan of Rs.3,00,000/- for 20 years (240 installments) @ 11% would have an EMI of Rs.3096 per month for entire 240 installments. Total amount you pay to the bank would be around Rs.7,40,000/-.

Draw your own conclusions!!!



25-03-2009, 11:20 AM
dear sir
many thanks for the insight into the matter. and it is evident that the govt HBA is working out cheaper than the other. Nevertheless may i request that detailed formula for both the schemes be provided so that i draw out my own excel sheet.
further more when i started speaking about second mortgage to few banks they want original papers with them.... definitely once the propertyis first mortgaged to President of India the papers will be held with the department and they would not like to release it.
is there a way out of that...
also i would love to know if there are any banks which provide loan on second mortgage. I have already spoken to the following banks with NEGATIVE repsonse:- SBI, Vijay Bank, LIC housing, Bank of Baroda.


25-03-2009, 01:14 PM
Dear Kailashbansal ji,

Please buy a copy of Swamys compilation of House Building Advance Rules published by Swamy Publishers (P) Ltd. This book costs Rs. 200 only. It will clear all your doubts.




PS: As for your query on second finance, the same is available in most of the Nationalized Banks. If they deny, write a RTI letter to their regional/zonal office. They will concede.

03-04-2009, 10:03 PM
Dear Kailashji,
While HBA is definitely beneficial, time ur availing it. Do not avail HBA for asmall house at the beginning of the carrier. Wait till u put on enough service and avail it at the middle of ur service if u r sticking in the srvice as the quantum u will get will be higher and at easy instalments. For a small house at the beginning of ur carrier, try to arrange loan from other sources. You can avail HBA from government source only once. also note that if ur spouse is also in government service only one will get the HBA. Both can avail individually before marriage. if both are employed, the amout of HBA can be calculated over the sum of both the salaries.:):)


06-04-2009, 09:27 PM
Dear Friends

I beg to differ from the above opinion of jarunanji. The pay revision has taken place now and it is advisable to take the loan with a longer tenor now rather late. The experiance is one can take at an early stage or in the late stage.