The Government of India has set an ambitious target of installation of Grid Connected Rooftop Solar Photovoltaic (GC-RSPV) projects with capacity aggregating 40 GW out of the total incremental target of 175 GW of Renewable Energy capacities by 2022. To give a fillip to this segment the government of India is encouraging the adoption of solar energy by every Indian. To promote convenient adoption and use of solar energy, public sector banks & private banks have been given statutory instruction by the Ministry of Finance to offer solar rooftop loan at a reasonable cost.
The most common questions in installing a solar system are what will be the total cost; can I get a loan or EMI option?
Banks & NBFCs
The first way of financing is banks, which offer loans to finance rooftop installations. The rate of interest that depends on the borrower’s source of income and risk profile varies significantly from one bank to another. The rate of interest starts anywhere from 10% to 18%. The maximum tenure for the loan again varies from bank to bank ranging from 1–5 years up to 20 years. Even the securitization of the loan varies from one lender to another. While some banks seek to mortgage the residential property and hypothecate the solar equipment, some banks like YES bank issue an unsecured loan.
NBFCs also finance solar installations on residential properties. However, unlike banks, the interest rates are quite steep, ranging from 13% to 24%, though most don’t demand collateral.
Retail Loans
Retail companies have tie-up with leading banking and non-banking companies to provide solar loans to consumers. For example, Luminous, which has tie-ups with YES Bank and IDBI, finances their end customers through their dealer networks.
Customers can also pay EMI through credit cards like other consumer durables. However, these options are only meant for the components, where the customer comes to the counter, buys required components, and then pays the EMI later.
There are various choices for the end consumer to finance their rooftop solar installation — from conventional mortgage loans to ‘no security’ personal loans and even over the counter credit card payment options. Consumers only need to be aware of all the available options to make the right financing choice.
