After banks now the housing finance are reducing lending rates for the borrowers. LIC Housing Finance (LICHF) has announced a cut in lending rates for new borrowers by 100 basis points across various loan categories. After this cut home loans up to Rs 30 lakh, irrespective of the tenure, will get cheaper by 100 bps at 8.75 per cent, whereas for loans above Rs 30 lakh, the rates have reduced by 9.75 per cent as against 10.75 per cent earlier. The new rates have come into effect from February 1.
LIC Housing Director & CEO R R Nair remarked, “Earlier, similar loans with tenure up to five years charged 9.25 per cent and loans with tenure between five and 20 years attracted 9.75 per cent. Now we have decided to aggregate the two schemes and charge same interest rate”. Around 80 per cent of LICHF’s loans come under the Rs 30-lakh category, with an average loan size at Rs 16 lakh.
Meanwhile after the meeting with acting Finance Minister Pranab Mukherjee, many public sector bank chiefs, including UCO Bank and Corporation Bank, had signaled a cut of 50-100 bps in lending rate.
State Bank of India has already announced 8% cut on home loans for a year, irrespective of tenure and amount.
The offer announced by the SBI does not provide any benefit to the existing borrowers but it will be reviewing the decision on April 1.
Nair said, “We have passed on the benefit of incremental reduction in costs to the new borrowers. We always take a quarterly review of the lending rates for the existing borrowers, as we take into account the average cost of funds which is next due in April”.
Earlier on January 1, the company had announced cut in lending rates for existing borrowers, which is at present in the range of 10.75-11.25 per cent, by 75 bps.
In December quarter, the firm attained a 26.70 per cent rise in net profit at Rs 134.33 crore and distributed Rs 1,944 crore. The firm’s total borrowing in 2008-09 fiscal year would go up to Rs 11,400 crore as compared to Rs 7,490 crore last year.
Nair added, “The repayment outgo has increased with rising costs, so our borrowings for FY09 have increased. We have already borrowed Rs 8,800 crore in FY09 and we would require another Rs 2,500 crore to support our annual disbursement target of Rs 10,000 crore.”
Wednesday, February 18, 2009
Tuesday, February 17, 2009
Home loans still not within reach of borrowers
After the Reserve Bank of India and the government directed banks to cut down the lending interest rates, in spite of that people are facing problem in taking a home loan. The reason being banks are openly insisting that borrowers are required to contribute 20-30% of the value of the property, instead of 10-15% earlier.
Banks finance proportion has also come down from 85-90% of the property value to 70-80%, therefore borrowers (mainly the younger lot) are finding it difficult to go for a home loan.
Recently SBI has brought down its home loan rate to 8% and free zed for one year. Therefore the bank will lend only 80% of the value of house if the requirement is between Rs 20 lakh and Rs 75 lakh. In case the loan is more than Rs 75 lakh, the bank lends only 75% of the amount. In fact, Punjab National Bank (PNB) is lending 75% of the loan for a property of above Rs 20 lakh.
Other PSU banks like Union Bank and UCO Bank are also lending only up to 80% of the value of the house. On the other hand private sector banks like ICICI Bank are asking for 20-30% buyer's contribution while giving a home loan.
In metros like Mumbai, Delhi/NCR Bangalore the average price of a three-bed room apartment is around Rs 40 lakh. In other big cities like Kolkata, Chennai and Pune, it is around Rs 30 lakh. Hence the buyer's contribution to buy a house of Rs 40 lakh has increased to Rs 8-10 lakh, from Rs 4-5 lakh earlier. This is acting as a big restriction for a young buyer especially in the age group of 30-35 years.
But the bankers are not really bothered. UCO Bank executive Director TM Bhasin told as real estate price are coming down, banks have increased the buyer's contribution with a view that the market value of the property should not fall below the loan amount during the course of repayment. He pointed out if the bank gives 85% of the transaction and the market value of the house falls by 20% within six months, the loan amount will be more than the value of the property taken as security. In such conditions, the borrower can decide to walk off surrender the house to the bank and like this bank will be able to recover the money by selling the property. To avoid such conditions, the bank has increased the buyer's contribution.
This factor played a very big role in the current US crisis. The banks have given up to 90% of the value of the house. But when the market price fell below the outstanding loan amount, the borrower decided to surrender the house to banks, which in turn are finding it difficult to sell them to recover money.
Banks have also tightened the norms related to a loan. Previously, they used to allow an EMI of up to 50% of monthly income of the borrower. But now, this has been reduced to 40%, this has made difficult for the borrower.
Banks finance proportion has also come down from 85-90% of the property value to 70-80%, therefore borrowers (mainly the younger lot) are finding it difficult to go for a home loan.
Recently SBI has brought down its home loan rate to 8% and free zed for one year. Therefore the bank will lend only 80% of the value of house if the requirement is between Rs 20 lakh and Rs 75 lakh. In case the loan is more than Rs 75 lakh, the bank lends only 75% of the amount. In fact, Punjab National Bank (PNB) is lending 75% of the loan for a property of above Rs 20 lakh.
Other PSU banks like Union Bank and UCO Bank are also lending only up to 80% of the value of the house. On the other hand private sector banks like ICICI Bank are asking for 20-30% buyer's contribution while giving a home loan.
In metros like Mumbai, Delhi/NCR Bangalore the average price of a three-bed room apartment is around Rs 40 lakh. In other big cities like Kolkata, Chennai and Pune, it is around Rs 30 lakh. Hence the buyer's contribution to buy a house of Rs 40 lakh has increased to Rs 8-10 lakh, from Rs 4-5 lakh earlier. This is acting as a big restriction for a young buyer especially in the age group of 30-35 years.
But the bankers are not really bothered. UCO Bank executive Director TM Bhasin told as real estate price are coming down, banks have increased the buyer's contribution with a view that the market value of the property should not fall below the loan amount during the course of repayment. He pointed out if the bank gives 85% of the transaction and the market value of the house falls by 20% within six months, the loan amount will be more than the value of the property taken as security. In such conditions, the borrower can decide to walk off surrender the house to the bank and like this bank will be able to recover the money by selling the property. To avoid such conditions, the bank has increased the buyer's contribution.
This factor played a very big role in the current US crisis. The banks have given up to 90% of the value of the house. But when the market price fell below the outstanding loan amount, the borrower decided to surrender the house to banks, which in turn are finding it difficult to sell them to recover money.
Banks have also tightened the norms related to a loan. Previously, they used to allow an EMI of up to 50% of monthly income of the borrower. But now, this has been reduced to 40%, this has made difficult for the borrower.
Thursday, January 22, 2009
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.
Friday, January 16, 2009
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.”
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.”
Monday, January 5, 2009
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
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".
Friday, December 12, 2008
Home loan firms in no mood to cut rates
In the last few weeks Public sector banks have announced of lowering home loan rates after a slew of measures by the Reserve Bank of India (RBI), but housing financial companies (HFCs) are yet to take decision on the issue.
According to HFCs the cost of funds is showing no signs of reduction since banks are still charging around 12-13 per cent, which is higher than the average lending rate of HFCs.
For instance, HDFC and LIC Housing Finance Company, the two big house financing companies together account for over 70 per cent share of the HFC market and charge around 11.5 per cent, whereas home loans from Dewan Housing Finance Company costs between 12 and 14 per cent.
“Our interest rates are a function of our cost of funds. We have always passed on the benefit of lower cost of funds to our customers and we will continue to do the same. As of now, we have not seen interest rates coming down even though RBI has taken steps to provide liquidity. The issue today is not of liquidity, but of credit and until it is made available, it would be difficult for anyone to bring down interest rates,” said HDFC Joint Managing Director Renu Sud Karnad.
“With banks cutting home loan rates, there is an expectation of rate cut in the housing sector, but our cost of funds still remains high. In the foreseeable future, there is no scope for reduction in lending rates,” added LIC Housing Finance Chief Executive Officer R R Nair.
HFCs sources said the high cost of funds has affected their ability to compete with public sector banks because the weighted average cost, on an average, is 300 basis points higher. Nair added on the contrary, lending rates are 50-100 basis points higher than those of public sector banks.
“We are lending to NBFCs at about 13 per cent, which will not come down as we consider it as a high-risk sector,” said an executive of a large public sector bank.
As per the industry approximate calculation, HFCs comprise over 40 per cent of the Rs 1,20,000-crore housing finance market. According to executives of these companies said HFCs will now account for 15 per cent of an increase in the pie as against 25 per cent in 2007-08.
Recently the National Housing Bank (NHB) had even raised the refinance rate to up to 12 per cent from around 9 per cent which also did not help the cause of HFCs.
In the current circumstances the bigger players, backed by strong background, are still finding difficulty to sustain the higher cost of funds, thus their smaller peers are finding it even more tough to operate.
“The recent measures by the regulators have not translated into the availability of credit from banks. We operate in the lower-income group, with an average loan ticket size of Rs 6-6.50 lakh with a very low margin. So, if things do not improve soon, we will be left with no choice, but to increase lending rates,” said Dewan Housing Finance Vice-Chairman and Managing Director Kapil Wadhawan.
Wadhawan confessed that in the current year, the distribution growth has slowed down compared as compared to the last year.
“The real estate market is reeling. So, the demand is bound to come down. But, we hope to grow at around 18-20 per cent in incremental disbursement this year compared with over 25 per cent growth last year,” he added.
Tuesday, December 2, 2008
LIC Housing Finance giving loans to builders
The expectations have grown high regarding the downward slope in the interest rates of home loan after the cut in repo rates. Therefore LIC Housing Finance is distributing more loans to builders/developers who comprise to 6% of their business as against individuals which frame up to 94% of their business.
R.R. Nair, director and chief executive, LIC Housing Finance informed that, “We are supporting the builders and developers by funding their upcoming projects to support individuals to afford real estate properties. This will, in due course, result in escalating business in our home loan segment”.
According to latest reports builders are now negotiating prices with buyers, though they are still refusing to reduce property prices officially. LIC Housing is offering easy and hassle-free loans to builders (for new projects) with an aim to encourage builders to reduce prices to a reasonable level.
The main idea behind the move in focus is to encourage individual buyers to book properties. The objective is clear in the loan disbursement target set by the company for the current fiscal. By the end of the current fiscal the company plans to distribute Rs 8,000 crore in home loan segment and Rs 2,000 crore loan to builders, as against Rs 5,900 crore and Rs 1,200 crore respectively in the last fiscal 2007-08.
Up till now, LIC Housing has distributed Rs 5,000 crore, of which Rs 500-Rs 600 crore has been given to builders. Furthermore, it has already sanctioned Rs 6,000 crore loans for which disbursement is due.
In the words of Mr. Nair, this strategy can originate as “loan on tap”. “When we give loans to builders, we also make soft approach to their buyers to take home loans from us. The builder himself shows the way, although it is not a compulsion for the buyers,” he explained.
LIC Housing will be providing funds to builders in all projects sizes--big, medium and small. As per information available from sources it has allocated funds to real estate projects of Rajeha Builders, Sheth Builders and is also in the process of loaning money to Sriram Builders. But Mr. Nair refused to comment on these developments.
While distributing loans in this distressed economic situation, LIC Housing is taking certain precautionary measures. At present company is funding estate projects mostly in groups with other financial institutions like HDFC, SBI, Punjab National Bank, Axis Bank, Central Bank. “This strategy was framed to distribute the risk factor, especially in this downturn market. In a big project of Rs 2,000 crore, if all institutions contribute partly, the risk factor is mitigated on pro-rata basis,” Mr. Nair said.
The company also makes sure that the asset value of the securities given by the borrower as collateral should be twice the loan value. Thirdly, it is carefully examining the cash flow of the builders keeping in mind of the current depression. LIC Housing also do the study of the neighborhood to determine the rationale for pricing a property.
Subscribe to:
Posts (Atom)