HOME loan companies are continuing to attract borrowers with ''concessional home loan'' packages despite the Reserve Bank of India (RBI) hiking the repo (at which it lends to banks) and reverse repo (at which RBI pays bank on their overnight deposits) rates and yet another rate hike evident on the horizon.
The rate war started when the country's largest lender, State Bank of India (SBI), launched the teaser scheme, which offers home loans at the rate of eight per cent per annum for the first year and then at nine per cent for the second and third years, irrespective of the market fluctuations.
According to Keki Mistry, chairman and chief executive officer (CEO), HDFC Ltd, ''There is a lot of demand for affordable homes. These loan packages will free the new customers from the worries of fluctuation of rates, at least initially.'' Ironically, HDFC was initially critical of SBI's move. But as the public sector lender's teaser rate proved a huge success, HDFC was forced to follow suit.
HDFC introduced a home loan package for new customers at an interest rate of 8.25 per cent till March, 2011 and at 9.25 per cent in 2011-12, thus providing them relief for the initial two years. Afterwards their home loans become linked to rates prevailing in the market.
Mistry added that as the cost is low, the mortgage major deemed it right to pass on the interest rate benefit to the customers.
And as sales of residential properties are picking up, the home loan market is getting increasingly competitive.
According to industry experts, the home loan segment is set to grow at a compound annual growth rate (CAGR) of 20 per cent and big lenders are aggressively looking to capture their share of this burgeoning market.
The latest one to join the bandwagon is Indiabulls Financial Services Ltd. It is offering a flat interest rate of 8.25 per cent till April, 2012.
''Introduction of this new concessional home loan scheme at 8.25 per cent augurs well for our aggressive growth plans. We have an annual target of disbursing new home loans worth Rs 6,000 crore,'' Gagan Banga, CEO, Indiabulls Financial Services Ltd said.
Indiabulls introduced the new concessional rates to beat competition as it is targeting to grow its home loans portfolio by 40 to 45 per cent. The company is eyeing to increase its market share in the home loan segment from the current four per cent to seven to eight per cent by 2014.
''It is not that suddenly all the lenders have become customerfriendly.
The banking companies are trying their best to lure home buyers. Moreover, there was hardly any growth in the last two years. As home loans are generally considered safe loans, banks will continue (with these lowcost loans) even after RBI goes for another hike,'' a senior official of LIC Housing Finance said.
LIC Housing Finance Ltd is offering home loans at 8.9 per cent interest rate up to March 31, 2012. Thereafter, the loans would attract the market rate of interest. LIC Housing has another scheme that offers nonfluctuating 9.25 per cent interest for the first five years.
These new home loan products are proving to be big hits with borrowers.
Giving another perspective, Anil Kumar Sharma, chairman and managing director (CMD), Amrapali Developers, told Mail Today, ''It is not the increase in service tax or marginal hike in home prices that deter the buyers.They are most bothered about the lending rates. If there is an increase or fluctuation in the lending rates it becomes a matter of concern for the developers (too) as it affects the sales of new homes,'' he added.
STORY SO FAR
RBI hiked repo and reverse repo rates
Home loan firms are still attracting borrowers with ''concessional home loans''
SBI was first to launch the teaser scheme
Though initially HDFC was critical of SBI's move, it was forced to follow suit. It introduced home loans at the rate of 8.25% till March, 2011 and 9.25% till 2011-12
Home loan segment is set to grow at a compound annual growth rate ( CAGR) of 20 per cent
Indiabulls Financial Services Ltd is latest entrant offering flat interest rate of 8.25 per cent till April, 2012
LIC Housing Finance offers home loans at 8.9% interest rate up to March 31, 2012
Source:http://in.news.yahoo.com/
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