HDFC new home loan rates for limited period

On Friday HDFC leading mortgage lender posted new loan rates under which the loan amount up to Rs 30 lakh will carry interest of 9.75 per cent and above Rs 30 lakh will attract interest of 10.75 per cent per annum.

The rates have come into effect from Friday, and the offer is valid for limited period. In a statement released by HDFC stated the new offer will be applicable for new floating rate home loan customers.

On the other hand the bank reduced its deposit rates in the range of 0.50 per cent to 0.75 per cent.

HFCs set to slash rates on sub- Rs 20 lakh loans

New Year brings good news for new home loan borrowers. New home loan borrowers, with a loan size of less than Rs 20 lakh, will probably get cheaper loans from institutional lenders from January 1, 2009. The second-tier specialized housing finance companies (HFCs) following the footsteps of the leaders too, are introducing special home loan schemes for the sub-Rs 20 lakh loan category. With this large section of fresh home loan takers get benefited.

Second-step HFCs, which are planning to slash rates, include Dewan Housing Finance (DHFL), GIC Housing Finance (GICHF), DHFL Vysya Housing Finance, among others. They might reduce interest rates by 1-1.5 percentage points as compared to their existing rates for loans up to Rs 20 lakh.

These lenders also have plans to reduce rates for existing borrowers, although by a lesser extent. GICHF, with a home loan portfolio of Rs 2,800 crore, has decided to reduce interest rates by 1-1.5 percentage points for fresh borrowers. Therefore for loans below Rs 20 lakh, it will be charging 10.25% per annum for 5-15 years and 10.5% per annum for over 15 years.

On the other hand DHFL, with a home loan portfolio of around Rs 5,000 crore, is yet to finalize its plan. According to information received from the sources, it might offer special rates, too, for the both sub-Rs 20 lakh and sub-Rs 5 lakh loan categories. It is a subsidiary of DHFL Vysya Housing Finance, also plans to introduce special rates for new home loan takers.

These players have taken the indication from public sector banks and the market leader Housing Development Finance Corporation (HDFC). Following the government’s instruction, public sector banks have introduced a concession rate of 9.25% for home loans below Rs 20 lakh and 8.5% for loans less than Rs 5 lakh. HDFC the home loan leader has announced a floating interest rate of 10.25% for loans up to Rs 20 lakh and 11.25% for loans above Rs 20 lakh.

National Housing Bank (NHB), which offers refinance support to HFCs, has offered a special Rs 4,000-crore refinance facility at 8% annual rate. It is also offering a Rs 2,000-crore refinance support for loans against rural housing projects.

“As we will get refinance from NHB at easy terms, we have decided to pass on the benefit to new customers from January 1,” GICHF managing director M Sivaraman told ET. However Industry players are of view that NHB facility would be given only against fresh lending. So, the benefit of the soft rates will be limited to fresh loans. GICHF, for instance, will reduce its interest rates for existing customers by 0.25 percentage points.

According to DHFL Vysya Housing Finance managing director R Nambirajan, the company will be cutting its rates by 0.5 percentage points for existing borrowers across the range. “Besides offering the special refinance scheme, NHB has reduced its normal refinance rates too. Both the moves will help lowering interest rates,” he said.

While on Tuesday NHB CMD S Sridhar said, “As we have reduced rates, we also expect HFCs to reduce rates and pass on the benefits to end-customers.”

Govt banks to offer up to 9.25% on home loans

After RBI efforts to bring down the inflation by cutting the repo and CRR the state-run banks are willing to lower interest rates on some loans to home buyers and small businesses as part of a government initiative to boost the demand in mid of a global crisis but analysts are of view that high real estate prices will reduce the demand.

O.P. Bhatt, chairman of State Bank of India, India's biggest bank informed government banks have agreed to offer interest rates of 8.5 percent on new home loans of up to 500,000 rupees and 9.25 percent for loans between 500,000 to 2 million rupees. "The thrust is economic stimulus," Bhatt said at a conference. "The concern is to stimulate (the) economy, to create demand."

He anticipated the home loan package can result in the disbursement of 150 billion to 200 billion rupees worth of loans by June 30, 2009, by the end of the scheme.

"This will not have much effect on margins," S.K. Goel, chairman and managing director of UCO Bank, said. "The revenue that the bank will get will be affected by 2-3 basis points."

Bhatt further explained that the interest rates will be frozen for five years, after which the borrowers can opt for fixed or floating rates.

Bhatt added the banks will require a margin of 10 percent for loans of up to 500,000 rupees whereas for loans between 500,000 to 2 million rupees it will need a 20-percent margin.

A banker pointed out till now the banks have been offering these loans at interest rates ranging from 10-11.25 percent with margins sometimes as high as 25 percent for both categories.

Bhatt further added now these home loans will have no pre-payment or processing charges and the borrower will get the benefit of a free life insurance cover for the entire loan outstanding.

Official maintained that home loans below 2 million rupees constitute more than four-fifths of the mortgage portfolio of state run banks.

Bhatt said in a correlated move to boost economic activity, the banks are also planning to cut rates on existing and fresh loans to micro industries by 100 basis points effective immediately.

He added that small and medium enterprises will have to pay 50 basis points less on loans up to 100 million rupees.

It is expected that these moves by the state-run banks will follow a push of measures by India earlier this month, including $4 billion extra fiscal spending and a cut in key lending rate by the central bank to 6.5 percent, the lowest in two-and-a-half years.

Although analysts have welcomed the rate cuts but are sounding caution about the still-high real estate prices.

"Before lending starts, property prices should come down and cost of funds of the banks should come down. It will take 3-6 months for the cost of funds to come down," said Vipul Shah, an analyst at KR Choksey Shares and Securities.

Over the past five year the real estate industry was booming but from few years the real estate industry has been battling unenthusiastic sales, with purchases falling by a fifth in the first half of the year, as inflated property prices and decade-high interest rates brought an end.

"It may not be sufficient considering the overall economic downturn and high realty prices," said Hitesh Kuvelkar, associate director, research, at First Global Securities.

Though most real estate developers have cheered the move and hoped demand will pick up on softer interest rates and property prices.

While expressing his views Sanjay Chandra, managing director of Unitech Ltd said, "This will encourage a lot of people to buy and the next few months will be good for the sector".