Stimulus package offered to PSBs by govt. boosted housing loan demand

The benefits of government’s first initiative taken to boost the realty sector in the form of special home loan package are visible. As per the latest data released by RBI there has been a growth of 353% i.e. four times growth in housing loan distribution during three months ended May 2009 in comparison to the average 53% decline in the previous three quarters.

Bank of India executive director M Narendra said, “It was a right step to introduce the stimulus package. This helped to ease out the risk of interest rate volatility for at least the initial years”. He added unless there is growth in housing, real estate and construction sectors the core sectors like steel and cement can not grow.

In December 2008 the home loan rates were around 11% therefore to boost realty sector special housing loan scheme was announced. Under this the public sector banks were given a special incentive package to offer home loans at low interest rate.

Under the scheme housing loans of up to Rs 5 lakh offered at 8.5% interest rate and for Rs 5-20 lakh the banks charged 9.25% for the first five years. Although this scheme was up till June 30, 2009. The scheme received gentle response in the initial stage. Later on in the month of April and May the demand started picking up due to which there was a growth of Rs 3,138 crore in housing loans during three months ended May 22 as against to Rs 693 crore in first three months of the scheme.

For instance Bank of India residential mortgage year-on-year (YoY) basis increased to 31% at the end of June 2009, as compared to 15% growth at the end of March 2009. Other banks also witnessed the similar growth.

IC Shetty, divisional manager of Canara Bank stated, “The response to the scheme showed the impending demand in the sector. April May and June saw the maximum loan applications”. The measure taken by the government showed the positive response of boosting housing demand which helped the homebuyers who were unable to fulfill desire of owning a house due to skyrocketing prices.

The low interest rates scheme not only attracted aspirant home buyers but also helped the developers in generating revenues. During August’08-March’09, hardly any houses were being sold but by April the demand picked up so much that almost 3-4 flats were being sold every week.

Can Fin Homes Ltd reduced home loan rates for fresh loans

Canara Bank subsidiary Can Fin Homes Ltd (CFHL), has reduced the home loan rates for fresh individual housing loans. The new rates have come into effect from 1 August, 2009.

According to CFHL release the company, in the current financial year has reduced the rates of second time.

As per revised interest rates on fresh loans rate will be 8.7 per cent for loans up to Rs 20 lakh, 9.00 per cent for loans above Rs 20 lakh to Rs 30 lakh and 9.75 per cent for loans above Rs 30 lakh.

The rates have been reduced under variable interest rate scheme and will be applicable for all repayment periods

For the current fiscal the company has set a target of disbursing loan of Rs 550 crore as against Rs 300 crore as of March 2009 at the growth rate of 83 per cent, the release stated.