The State Bank of India (SBI) on Wednesday launched a scheme for its home loan customers, wherein it guarantees the refund of the principal amount if a builder fails to complete the project within the stipulated time.

The bank has introduced Residential Builder Finance with Buyer Guarantee (RBBG), which guarantees completion of projects funded by the bank to customers availing SBI Home Loans.

According to SBI chairman Rajnish Kumar, the product will build confidence among homebuyers for under-construction projects as it will secure their hard-earned money. At the same time, it will boost the under-stress real estate sector.

Under RBBG, the guarantee would be given by the bank until the project gets the OC.

“Suppose a buyer has booked a flat in a project for Rs 2 crore and has paid Rs 1 crore, and if the project gets stuck then we will refund Rs 1 crore. The term of the guaranteed will be linked till OC,” he explained further.

Initially, this product will be available in seven cities. “It is yet another effort by SBI to make affordable housing conveniently accessible to individuals with dreams of owning their desired home. Based on the response from both builders and customers, we may consider extending this product to other parts of the country,” said Kumar.

RBBG will focus on the affordable housing segment with home prices of up to Rs 2.50 crore in seven Indian cities initially. Under this product, all reputed builders fulfilling the prescribed criteria by the bank can avail loans of between Rs 50 crore and Rs 400 crore.

SBI commands a 25% market share in home loans in India. The country’s largest lender has partnered Sunteck Realty — the first builder to avail this scheme. The bank is pushing home loans, the largest contributor to its credit growth this year, by bringing down interest rates to below 8% — the lowest in the industry.