Home loan seekers can now expect greater transparency

A panel from Reserve Bank of India has proposed a transparent pricing structure for floating rate loans. As per the proposal the benchmark rates would get automatically revised with the reduction in cost of funds.

The panel has suggested the banks to discontinue using bank’s prime lending rate in pricing floating rate loans and arrive at a base rate that reflects the cost of one year deposits. It has also proposed a cap on the extent of loans granted below the benchmark lending rate.

RBI governor D Subbarao said that though RBI slashed its repo rate, the rate at which it lends to banks, by 425 basis points the banks reduced their PLRs by 200 basis points only. Most of the benefit was passed only to the new borrowers.

MV Nair, Chairman of Indian Banks’ Association said that if the proposal is accepted, it would bring more transparency in the system and the prevalent practice of lenders arbitrarily quoting low rates for new borrowers will stop.

“The new system of base rate will help banks to price their loans more efficiently” said AC Mahajan, Chairman of Canara Bank.

However, some bankers say that though the base rate system would be transparent, it would not consider the non performing assets, which play an important role. Bankers also said that the proposed system would not make the home loans cheaper or more expensive since the present base rate for most of the banks is around 8.55 percent while most of them charge 9.75-10 percent.

In another development, the apex bank has put a limit on Third Party ATM usage (Oct 20). According to the new regulation, a customer would be allowed Rs 10,000 per withdrawal and the number of transactions would be limited to five per month. The banks would charge Rs 18-20 per transaction in excess of five.

Source:http://www.rupeetimes.com/news/home_loans/home_loan_seekers_can_now_expect_greater_transparency_2884.html

Loan offers lend colour to the festive season

It is that time of the year when banks and finance companies lend color to the festive season by rolling out the red carpet for customers. Yes! We are talking about the special loan offers by the financial institutions that are up for grabs during this festive season. The offers span across the entire spectrum of loans including car loans and home loans. A quick look!

The home loan scenario

The home loan offers this season get even better with the dip in home loan rates expected to continue even past the magic “8 %” figure that was on offer to improve the lending scenario and breathe new life into the realty market.

Reports suggest that the home loan market is all set to show a growth of 30 per cent and this is likely to become a fact given the current home loan interest rate trend. Check ou the options available.

State Bank of India has announced that it is waiving off the processing fee for three months. It had reduced its new home loan rates to 8 per cent. Bank of Baroda [ Get Quote ] has plans to waive off the processing fee too.

HDFC bank offers a floating interest rate of 8.75 per cent for loans up to Rs 15 lakh (Rs 1.5 million), and at 9 per cent for loans between Rs 15 and Rs 50 lakh (Rs 5 million) and 9.5 per cent for loans above Rs 50 lakh up to a tenure of 20 years.

ICICI bank offers home loans up to Rs 20 lakh (Rs 2 million) at 8.75 per cent interest rates this festive season. And it will be 9.25 per cent for loans between Rs 20 lakh and Rs 50 lakh.

Development Credit Bank, a recent entrant into the home loan segment and GIC Housing are offering below the 8 per cent interest levels. In the first year DCB charges 7.95 per cent for home loans up to Rs 5 crore (Rs 50 million) at fixed rate of interest. From the second year onwards it will be on the floating rate of interest method.

Bank of Maharashtra [ Get Quote ] has joined the fray this festive season by offering 8 per cent home loan rates for loans up to Rs 30 lakh (Rs 3 million) for the first two years. Thereafter, it will be 8.5 per cent for the third year, 9.5 per cent in the fourth year and 9.75 per cent in the fifth year making it 8.75 per cent the average rate of interest during the first five years. The reset clause will come into play at the end of every fifth year.

Source : http://business.rediff.com/report/2009/oct/14/perfin-loan-offers-lend-colour-to-the-festive-season.htm

GIC Housing Finance to disburse Rs 750-cr housing loans

With demand for real estate picking up, General Insurance Corporation of India (GIC) Housing Finance is targetting disbursal of Rs 750 crore housing loans this year, a top official of the institution has said.

Due to economic slowdown, GIC’s housing loan disbursement had been ’static’, but it would pick up by the second half of this fiscal. Till september this year, the disbursal was Rs 290 crore, M Sivaraman, managing director, told reporters here last night.

Last year’s disbursal was Rs 600 crore, he added.

Since August 2008, the demand for housing was stagnant, while there was large scale correction in price level of real estate sector. Prices of property have been corrected by 25 per cent ot 30 per cent in the market, Sivaraman said.

He added demand for housing was deteriorating due to existing prices in the real estate sector.

To woo more investors, GIC had introduced a limited period special scheme for festival season, from October this year, for all new individual housing loans up to Rs 1 crore. The rate of interest applicable for the period was 7.95 per cent for a 6 months period after which it would reset to the then prevailing base lending rate, he said.

Besides, free accidental death insurance cover and free property insurance cover would also be available to applicants, Sivaraman added.

On shift in demand from luxury to budget houses, he reasoned how builders were now concentrating more on budget segment since the correction in value was more in luxury segment.

Around 40 per cent of the business was from Maharashtra and GIC was spreading to tier II cities in the state. Three more offices would be opened this year in Indore, Baroda and Nasik.

An office at Nagpur was recently opened, he added, saying next year eight more branches were being planned. The next 5 years, GIC has plans to open branches in 100 locations across the country.

“In Kerala, GIC has disbursed around Rs 26 crore and the company was planning to grow at the rate of 25 per cent this year,”he said.

The NPA level was under control. Dring 2007-08, it was Rs 98 crore and during 2008-09, it could be reduced to Rs 90 crore, Sivaraman added.

Source : http://www.business-standard.com/india/news/gic-housing-finance-to-disburse-rs-750-cr-housing-loans/75155/on

Fixed-rate home loans are history

With interest rates close to bottoming out, Amit Pandey, a young executive with a multinational firm, is looking for a fixed-rate home loan. But he is unable to do so in a market flooded with combo offers.

These offers allow new borrowers to avail of fixed rates for three to five years. After that, they have to shift to the prevailing floating rate.

Currently, ICICI Bank and HDFC do offer fixed-rate loans but the differential between fixed and floating rate loans is huge — up to 675 basis points.

ICICI Bank offers fixed rate home loans at 16 per cent and HDFC at 14.25 per cent. For ICICI Bank, the difference between fixed and floating rate loans is 6.75 per cent and for HDFC it is 5.25 per cent, according to apnaloan.com.

There is another set — which includes the likes of Axis Bank — that does offer fixed-rate loans but keeps the option of periodic revisions open.

“If you compare the current situation with the beginning of the decade, the volatility in interest rates has gone up drastically. Those who are offering a pure, fixed-rate product need to charge a premium,” said K V S Manian of Kotak Mahindra Bank.

Bankers said the degree of interest rate volatility has risen because the country’s securities markets is impacted by global events and the inflow of cross-border money. Plus, most bankers and economists are expecting interest rates to go up. The economic recovery in India and some parts of the world, inflation and the government’s borrowing programme are all expected to send interest rates upwards in a few months.

“In such a situation, the lower pricing of fixed rates will amount to a loss,” said a banker.

In other words, the fixed-rate home loan is history, at least for now. “What we saw in 2002-03 cannot be repeated. Interest rates in those days were benign. There was no retail demand,” said Bank of Baroda Chief Economist Rupa Rege-Nitsure. In 2002-03, the difference between fixed- and floating-rate products was between 50 and 200 basis points and many borrowers shifted to fixed-rate loans around that time to ensure they were not hit by a rising rate cycle.

Some lenders have faced problems in the past on portfolios that had fixed rate home loans, said LIC Housing Finance Director and Chief Executive Officer R R Nair. “Around 2006, when rates started their upward movement, lenders started losing money on the portfolio that consisted of fixed rate home loan products,” he said.

In developed nations, like the US, a 30-year fixed-rate home mortgage is a standard product, according to experts. But this is possible only because the US has mature securities markets with products such as interest rate futures. “This allows the bankers to hedge their long-term loans,” said Manian.

Source : http://www.business-standard.com/india/storypage.php?autono=372214

Home loan takers to benefit with sub-PLR rates set to go

PEOPLE who borrow money from banks to buy homes at floating rates of interest are set to benefit as banks are expected to change the way they price such loans. The Reserve Bank of India (RBI) is preparing to ban lending below the prime lending rate (PLR), the benchmark rate for all floating rate bank loans.

Sub-PLR lending came into existence a decade ago after banks obtained permission from the central bank to lend below the benchmark rate. RBI had accepted the argument by bankers that by not lending below PLR they were losing customers to mutual funds and other lenders who were willing to invest in their short-term debt at rates below PLR.

But it has been increasingly felt that the existing practice of pricing loans is not transparent and does not effectively transmit changes in policy interest rates across the banking system. This led to RBI constituting a committee under executive director Deepak Mohanty to review the PLR practice. Currently, 75% of loans by banks are at sub-PLR rates.

However, it is unlikely that RBI will put a comprehensive ban on such loans. People privy to the proposed development said banks may be allowed to quote sub-PLR rates only on short-term , or on loans below one year.

If RBI bans sub-PLR rates on all loans above a year, home loans would have to be priced at PLR or above PLR. This move will reduce the scope for banks to reduce rates only for new customers by altering the spread between their PLRs and lending rates. For instance, today it is not uncommon for a bank whose PLR is 11.5% to have one borrower paying 12% on a floating rate loan while offering a loan at 9% to a new borrower. This is possible because the old borrowers loans have been fixed at a rate of PLR plus 50 basis points while the new borrower is offered loans at PLR minus 250 basis points. Because of banks playing with the spread, old customers feel cheated.

Once PLR is fixed as the floor rate, with the maximum rate capped at 400 basis points above PLR, banks will be left with little headroom to vary rates for old and new borrowers. Large corporates would prefer to take short-term loans since they would be able to bargain for lower rates while small to mid-size corporates may benefit the most as there would be some transparency on pricing.

Source:http://lite.epaper.timesofindia.com/getpage.aspx?publabel=ET&city=Bangalore

Reduce EMI and loan tenure, save money!

Anup bought a car after taking a loan of Rs 3.5 lakhs. He was paying Rs 7, 538 per month towards EMI. When his friend Sharad found out about it, he told Amit to think about reducing his monthly EMI, as he was paying too much to his lender. What should Amit do? Why should Amit lower his EMI?

Read on to know how Amit should go about lowering his EMI.

Importance of lowering EMI: Whenever you take a loan, you have to pay interest on the borrowed amount. This interest is an expense.

Higher the interest rate, higher the amount you pay towards interest. So you end up paying more towards the loan, thus making the purchase costly. Hence it is essential for you to reduce the amount you pay towards your EMI.

How to lower your EMI: There are various ways in which Amit can reduce his EMI. Here are some common methods of reducing your EMI:

Negotiate with bank for lower rate: If Amit banks with the same bank from which he had taken the loan, and has a good standing with the bank, he can negotiate with them to reduce the interest rate on his loan. In order to attract customers with good standing, many banks are willing to lower their interest rates on their loans.

So this is the first strategy Amit should use. But in case if his bank refuses to bargain with him to lower his interest rate, then he should …

Change lender: With the competition amongst the lenders intensifying and the market being penetrated by new lenders who offer competitive loans, it is easy for Amit to change his lender. But while changing lenders it is important not only to consider the interest rate charged but also other fees like processing fees, prepayment penalty, etc.

These fees and charges add up, thus making the loan quite expensive. At the same time, it is important to consider the charges charged by your current lender for letting you switch over to a new one. It is equally important to find out the quality of customer service of the new lender. It will help you in getting your problems solved in case if you face any problems while meeting your loan obligations.

Prepay: If Amit gets a salary raise or a bonus, he can use this amount to prepay all or part of the loan. With part prepayment, the principal amount goes down, automatically the loan tenure comes down, reducing  the total interest payable.

The higher the amount outstanding, higher the interest you will have to pay on it. Loans are not only financial burden, but they also cause emotional stress. By prepaying the loan, you end up reducing your loan tenure and hence both financial and emotional stress.

Pay off higher interest loans first: If Amit has a home loan, personal loan and credit card loan first, he should first pay off the credit card loan first, as this loan carries the highest interest rate. Once he pays off the credit card debt, next he should opt for personal loan, and then ultimately the home loan.

While paying off the higher interest loans, he should continue to pay the minimum amounts on the other loans. Once the higher interest loan is paid off, he can use the amount saved towards the next higher interest loan and continue till all the debt is repaid.

Loans have become a major expense in our modern lives. They not only cause financial stress but also emotional one. Hence you must take steps to reduce the EMIs and loan tenure, thereby reducing total loan cost.

Simple steps like bargaining for lower rate, changing lender, prepaying and repaying higher interest loans first will help you save money in the long run.

Source : http://business.rediff.com/report/2009/sep/14/perfin-reduce-emi-and-loan-tenure-save-money.htm

Can Fin Homes slashes interest rates

Housing Finance company, Can Fin Homes Ltd (CFHL) has revised its lending rates downwards for new home loan borrowers.

The new rates will come into effect 1 August 2009 onwards.

With this, the rate of interest applicable on all fresh home loans up to Rs 20 lakh would be 8.75 percent. Home loans above Rs 20 lakh and up to Rs 30 lakh would be priced at an interest rate of 9 percent, whereas the rate on loans above Rs 30 lakh would be 9.75 percent.

The revised rates will be applicable under a special ‘variable interest rate scheme’ for new home loans, irrespective of the period.

This is second revision made by the institution during this year. Earlier the home loan rates were reduced in Jan 2009.

The company plans to disburse loans worth Rs 550 crore during the current fiscal, which is a growth of 83 percent over the previous fiscal.

Incorporated in 1987, which is the “International Year for Shelter for the Homeless”, Can Fin Homes Ltd. is the biggest bank sponsored housing finance company in the country.

A sponsorship company of Canara Bank, Can Fin Homes is one among the top players in the country’s housing finance sector with pan- India presence.

Source : http://www.rupeetimes.com/news/home_loans/can_fin_homes_slashes_interest_rates_2723.html

SBI’s 2-day car, home loan mela

DAVANAGERE: The State Bank of India (SBI), Davanagere main branch, along with its four other branches including Harihar, is holding a two-day `Home  and Car Loan Mela’ at Abhinava Renuka Mandir, P B Road, in Davanagere on July 25-26, between 10.30 am to 5.30 pm.

Addressing a press conference, chief manager of Davanagere branch H Ranganath said, SBI aims to make at least Rs 15 crore business in this mela. Their earlier mela in December had made Rs 8 crore business, he added. The loan will be sanctioned on the spot for eligible customers. Those who attend the mela should carry any photo identity card, residential address proof, bank account statement for 6 months, salary certificate (for house loan) and a quotation for car loan, Ranganath said.

However, one month time (till September 30) will be given to submit other documents, he added. The rate of interest is 8% for the first year, followed by 9% for the next two years and after that it will be floating according to the existing rates, he said. No processing fee will be charged in the mela, he said.

Branch managers T Sidda Naik, Ashok Patvarkher, along with deputy managers Devendra Bellary and K Umapathy were present.

Source : http://timesofindia.indiatimes.com/NEWS/City/Hubli/SBIs-2-day-car-home-loan-mela/articleshow/4813043.cms

SBI Extends Home Loan Discount till September

State Bank of India, the country’s largest lender, has decided to extend the special offer for auto and home loans till September. Under the scheme, which was earlier valid till the end of April, the bank had frozen the interest rate on new home loans at 8 per cent during the first year, while the cost of auto loans was fixed at 10 per cent during the first year. Subsequently, the interest rate was to be revised to the prevailing rate. Extending the scheme by five months, the bank also said today that top-up loans for home loan customers that are disbursed up to September 2009, would cost 8 per cent in the first year. SBI reiterated that the special rates were aimed at stimulating demand. When it had first announced the special rate schemes, its rivals – including HDFC, the largest mortgage player – had termed the move as a teaser offer and had said that it would only result in borrowers shifting their accounts.

Subsequently, HDFC executives said that the move has not resulted in too many customers shifting to SBI to avail of the special offer. But the housing finance company responded by reducing its prime lending rate to enable its existing borrowers to avail of the lower interest rate regime. While SBI has lowered its benchmark prime lending rate by 150 basis points since November, it has not participated in the latest round of rate cuts by public sector banks. Instead, it has come up with special loan schemes aimed at housing, auto and small and medium enterprises.

When contacted, Nanda Kumaran, SBI’s chief general manager for retail banking said the bank has sanctioned loans worth Rs 2,500 crore to over 20,000 customers under the special home loan scheme which was announced in February 2009. Similarly, in case of the special auto loan scheme, he said, the response was good. Most auto loans disbursed through the scheme have been availed of by individuals purchasing entry-level models from Maruti, Hyundai and Tata Motors. These loans do not include the bookings for Nano, which opened last week. “We have received a good response to the schemes and the extension by five months is expected to help boost the demand in the economy,” Nanda Kumaran added. Executives at private sector banks said that SBI was among the most aggressive players in the car finance business at present and was among the highest loan disbursing lenders along with HDFC Bank. Many of the bigger players, such as ICICI Bank, Citi and Standard Chartered, have reduced the scale of operations in the auto loan market due to rising delinquency levels.

An SBI executive said that the country’s largest bank had managed to increase the outstanding retail credit portfolio to above Rs 1,00,000 crore at the end of March 2009, partly aided by the special offers and aggressive pricing of retail loans. It is targeting a 30 per cent growth in its retail portfolio during the current financial year. As of December 2008, SBI’s auto loans portfolio was estimated at Rs 8,970 crore, 32.14 per cent higher than the Rs 6,788 crore it had disbursed till December 2007. Similarly, during the period, its home loan portfolio grew 21.56 per cent to Rs 52,062 crore, while the residual retail loan book was estimated to have increased by 30.82 per cent to Rs 37,077 crore.

Source : http://www.indianrealtynews.com/home-loans/sbi-extends-home-loan-discount-till-september.html

MFIs offer home loans

CHENNAI: With the lending rates falling, it’s not just the urban home buyers who are benefiting. Micro finance institutions (MFIs) are now
rolling out home loan products to the poor in rural India. And they are finding takers too. For their part, MFIs are lending to those having a good repayment track record.

Most people in villages own plots and they construct the house on a low-cost model with indigenous materials, says Tara Thiagarajan, chairman of Madura Micro Finance. This low-cost construction model is what is prompting MFIs to dole out home loans.

SKS Microfinance is planning to launch a home loan product next fiscal. It would start as a pilot in rural Andhra Pradesh. “We are still finalising the interest rates,” says Suresh Gurumani, CEO and managing director of SKS Microfinance.

The rural home loan products are structured pretty much the same way as in the cities. The difference being the average loan amount. For MFIs, it ranges between Rs 50,000 and Rs 2 lakh with repayments being in equated monthly instalments (EMIs). Some like Madura Micro Finance also provide a payment holiday of four months for construction.

The real action on the rural home front is loans for home improvements and extension – converting the thatched roof into a tiled one, adding bathrooms or other additional rooms.

SKS and Grama Vidiyal, which is also planning to launch a home loan product soon, are concentrating on the home improvement and addition space.

Source : http://timesofindia.indiatimes.com/Business/MFIs-offer-home-loans/articleshow/4331728.cms

Home loan rates may drop again, say analysts

Home loan interest rates, especially on new home loan accounts, started softening from the beginning of this year when the Reserve Bank of India

(RBI) announced sharp cuts in the repo rate and cash reserve ratio (CRR). The RBI started slashing the key policy rates since October last year, after taking into account the worsening liquidity situation of banks here. The central bank has reduced its key policy interest rates (repo and reverse repo) and reserve ratio (CRR) four times in the last six months.

The cut in the repo rate meant commercial banks would have funds available at a lower cost. On the other hand, the cut in the CRR meant banks would have to keep less money with the RBI and hence they had more money to lend. Analysts believe that interest rates have not yet bottomed out and there will be further cuts in borrowing rates over the next few months.

These are some of the factors that are expected to bring the interest rates on home loans further down:

RBI moves

Analysts believe that banks have not yet passed on the entire benefits of lower interest rates (especially to existing home loan borrowers). This is because banks fix the interest rates based on the concept of net interest margin (the difference between average yield on advances and average cost of deposits). Usually, banks like to keep this spread (net interest margin) above three percent.

Banks are locked-in with higher interest rate deposits from the public for certain maturity periods and these deposits cannot be terminated in view of the prevailing market conditions . Therefore, the interest rates on existing loans cannot be lowered immediately. Meanwhile, the RBI and government are pressurising banks to slash the interest rates on existing loans as well.

Liquidity

The consumer sentiments have dropped drastically due to the global slowdown. The RBI encouraged banks to increase the credit inflow to the economy by increasing the bank credit target to 24 percent from 20 percent in the recent policy reviews.

The RBI also increased the money supply target to 19 percent from the current 16.5 to 17 percent levels. This will help increase the liquidity in the market, and also help in easy availability of loans.

Inflation rate drop

The inflation rate has come down drastically to around 2.3 percent for the week ended February 28 from its peak of 12.9 percent recorded in August last year. Analysts believe the inflation rate will go down further and may end up lower than two percent by the end of this month itself.

Some analysts believe there might be a negative inflation rate in a couple of months if the market conditions remain bad due to the higher base Tips for home loan borrowers
Home loan: Documents you need
Tax deduction on home loan
effect of last year. It will prompt the RBI to cut the policy rates further and that will have a direct influence on home loan interest rates.

Go for it

Borrowers should take note of these factors to track the movement of home loan interest rates. However, it is not prudent for all to keep waiting with their fingers crossed. Many banks have recently announced home loan rate cuts and people should not expect another rate cut in the next few weeks again. There are many attractive deals available for new home loan borrowers in the market. People who have already finalised on a property can choose from these available home loan offers.

A borrower should analyse the various aspects of home loans first. You should gather as much information as you can about the home loan product and lender you choose. You can consult those who have already taken a loan and gone through such an exercise.

Here are some important factors borrowers should analyse while going in for a home loan:

Charges

Understand the various charges, fees and penalties that the bank will charge at the beginning of the loan, during the loan tenure and at the time of termination of the loan. Some banks push for home loan insurance cover. You should weigh your risk profile carefully before choosing the insurance product .

Track record

Since a housing loan is a long-term relationship with the bank, you should look at the track record (trigger and frequency) of revising the home loan interest rates, in the last few years.

Flexibility
You should also look at the flexibility of charges on EMI revisions, part-prepayments and foreclosure of your home loan.

Source : http://economictimes.indiatimes.com/Features/Financial_Times/Home_loan_rates_may_drop_again_say_analysts_/articleshow/4298688.cms?curpg=2

Dena Bank cuts lending rates

State-run, Dena Bank has declared a cut in their interest rates of new housing loans, auto and trade finance loans by 25 to 50 basis points.

A press release issued by the bank stated that home loan rates and interest rates on trade finance scheme will be slashed by 25 basis points where as interest rates on auto loans will see a reduction of 50 basis points. The new rates of the bank are effective from March 16th.

The rate cut by the public lender was publicized close to the announcement made by the private leader, ICICI Bank. The bank has cut its lending rates on floating home loans for new borrowers as a response to the monetary policy actions taken by the RBI.

Many others have answered to the signal sent by the apex body to slashes the interest rates. Recently Canara Bank has also reduced its home loan rates and fixed them for a period of five years. Others like Bank of Baroda, Union Bank of India and United Bank of India have lowered their benchmark prime lending rates (BPLR).

BoB and Union Bank has cut the PLR by 50 basis points to 12% with effect from April 1st where as United Bank has lowered the PLR to 12.5% from March 5th.

Recently Dena Bank has also deferred its plan of entering into the general insurance space due to the current economic slowdown.

Source : http://www.rupeetimes.com/news/home_loans/dena_bank_cuts_lending_rates_2231.html

Low response to home loan scheme

Govt banks have cleared only 28,000 proposals so far.

Two months after lower interest rates were announced for home loans up to Rs 20 lakh, public sector banks (PSBs) have cleared only 28,000 proposals and disbursed Rs 1,550 crore under this special scheme.

For instance, India’s second-largest public sector bank Punjab National Bank (PNB) has approved only 35 loan proposals and disbursed Rs 1.70 crore under the scheme, according to data compiled by industry bodies and the government. At the other end of the spectrum is State Bank of India (SBI), the country’s largest lender, which has cleared around 6,500 applications (see table).

Under the special loan package, pushed by the government to boost real estate demand, public sector banks decided to freeze interest rates on home loans up to Rs 5 lakh at 8.5 per cent for five years. For loans between Rs 5 lakh and Rs 20 lakh, the rate was frozen at 9.25 per cent. SBI went ahead and dropped the rate further to 8 per cent for a year and others such as Central Bank of India have also responded in the same manner.

Further, borrowers can avail themselves of a loan of up to Rs 5 lakh by paying 10 per cent upfront and in case of home loans of Rs 5-20 lakh, the upfront payment has been fixed at 15 per cent compared to 25-30 per cent for other loans.

But with buyers expecting real estate prices to fall further, many are deferring a purchase for the moment, said bankers.

Up to Rs 5 lakh
Top 5 Bank	No. of loans	Amount
SBI & associates	6,970	260.57
Oriental Bank of Commerce	993	37.59
Syndicate Bank	1,528	33.68
Union Bank of India	1,228	30.15
Bank of Baroda	710	25.57
Bottom 5
Punjab National Bank	18	0.36
Indian Bank	41	0.84
IDBI Bank	65	2.14
Indian Overseas Bank	79	3.00
Uco Bank	160	3.39
Total for PSU banks	15,294	493.31

“Real estate firms are grappling with a sharp drop in demand and mounting debt repayment. They will have to reduce prices substantially to clear inventory. Once that happens, we may see some improvement in response,” said a senior public sector bank executive.

Though prices have dropped by around 30 per cent in certain pockets, buyers are more worried about the equated monthly installments (EMIs), which would come down if real estate prices dropped more, bankers said. “Interest rate is a smaller worry,” said a bank executive.

Rs 5-20 LAKH
Top 5 Bank	No. of loans	Amount
SBI & associates	4,414	375.76
Syndicate Bank	1,579	118.14
IDBI Bank	723	83.50
Bank of Baroda	659	67.35
Union Bank of India	691	67.06
Bottom 5
Punjab National Bank	17	1.34
Indian Bank	52	3.28
Uco Bank	159	9.70
Punjab & Sind Bank	129	12.30
Indian Overseas Bank	108	12.34
Total for PSU banks	12,829	1,056.90

“With the economic slowdown, many buyers are preferring to stick to rented accommodation instead of purchasing their own apartment,” another executive said.

Besides, many banks are not pushing home loans under this scheme as they are worried over their cost of funds. With funds raised at higher costs, public sector banks would see pressure on their spreads if they hawked the special scheme too aggressively, said an analyst at a Mumbai-based brokerage.

Apart from the cost of funds, banks also have to bear the cost of providing life insurance cover to the borrowers. Also, they are not allowed to charge any processing fee, which adds to the overall cost.

Bankers also said that even for normal home loans, demand has slowed down in anticipation of further reduction in real estate prices. According to the Reserve Bank of India data, the growth in housing loans dropped to 8.8 per cent for the year up to December 19, 2008, as against a year-on-year rise of 14.8 per cent in the period up to December 21, 2007. Banks sanctioned home loans of Rs 21,989 crore in the year up to December 19, 2008, as against Rs 31,780 crore in 12 months ended December 17, 2007.

Source : http://www.business-standard.com/india/news/low-response-to-home-loan-scheme/02/28/350517/

SBI launches new home loan schems

CHANDIGARH: V. Murali, Gener al Manager, State Bank of India, Chandigarh Circle flagged off the Mobile Publicity Van from SBI Zonal Office, Sector 5, Panchkula displaying two Home Loan Products i.e. SBI happy home and SBI life style.  The Publicity Van would be visiting in and around Panchkula for one month from Wednesday.

The publicity material giving details of the schemes will be available with the van.  Public can seek clarifications for their queries regarding both schemes. Speaking on the occasion Sh. Murali said that the Bank expect a good response from the public to these products.

SBI happu home and SBI life style loan is available at 8% (fixed for one year).  No processing fee will be charged on these loans.  While SBI happy home loan scheme will cater to the needs of those who need a home loan, SBI life style scheme will enable the Home Loan borrowers to get a loan at 8% (fixed) for one year to meet short term expenditure, which adds comfort to the life style of the borrowers, such as vacation travel, purchase of gold and life style goods.  This is good opportunity for those paying high interest rate to switch over to lower rate with SBI.  State Bank of India has also reduced interest rate on new car loans to 10% p.a. for a period of one year.

Source : http://www.punjabnewsline.com/content/view/15431/38/

India Infoline gets nod for home loan arm

India Infoline, a leading player in the Indian finance and financial services space today said that it received registration for its Housing Finance Subsidiary India Infoline Housing Finance from National Housing Bank (NHB).

Appul Nayyar, CEO, Moneyline said, “The Housing Finance License furthers our vision to be a leading player in the fast growing housing finance space in India. We will operate across customer segments and continue to provide high quality products and service meeting both immediate and long term requirements of our customers.”

India Infoline’s consumer finance portfolio stands at Rs 840 crore as on December 31, 2008. The approval of the housing finance business will enable India Infoline to further diversify the consumer finance portfolio and leverage its existing distribution strength for rendering housing loans as well.

Source : http://www.business-standard.com/india/news/india-infoline-gets-nod-for-home-loan-arm/11/46/55173/on

LIC Housing Finance to launch new financial services subsidiary

LIC Housing Finance (LICHFL) plans to launch a financial services subsidiary in this quarter to strengthen its distribution.

The company believes that launch of its financial services subsidiary called LIC Housing Finance Financial Services, will help it to improve its disbursement of loans and other financial products.

The first office of the new firm is expected to be operational in Mumbai by mid February.

After launch of first office, the company plans to open more offices with pan-India presence.

Presently, the state-owned LICHFL disburses loans through agents and around 7,000 marketing intermediaries. The firm has registered a net profit of Rs 134.33 crore in Q3 FY 09, a growth of 27 per cent as against Rs 106.62-crore in the year-ago period.

Source : http://www.stockwatch.in/lic-housing-finance-launch-new-financial-services-subsidiary-21711

Second relief package to prop up real estate sector

NEW DELHI: The government is considering a second relief package for the real estate and housing sector, which is crumbling under liquidity crisis  and a slowdown in demand. Apart from giving real estate an infrastructure status, the measures being looked at include reduction in interest rates from 9.25% to 7.5% for home loans up to Rs 30 lakh, an official in the department of industrial policy and promotion (DIPP) has said.

The ministry may also consider a proposal for doubling of income tax rebate on home loan interest to Rs 3 lakh from Rs 1.5 lakh and raising of income tax exemption on rentals from 30% to 50%. Finance secretary Arun Ramanathan is learnt to be finalising a note on required measures for easing liquidity in the housing and real estate sector for the consideration of the Committee of Secretaries (CoS).

“The finance ministry is considering demands of the real estate industry which could not translate into reality in the first fiscal package of the government,” a senior DIPP official told ET.

The official added that in the meeting of the CoS on economic crisis, held last month, Mr Ramanathan had pointed out that the recommendations made by real estate industry body Confederation of Real Estate Developer’s Associations of India for stimulating the real estate sector, including the housing sector, need to be considered. The recommendations made by the association were forwarded by the urban development ministry to the CoS.

Cabinet secretary KM Chandrashekhar had observed that construction activities need to be stimulated as this sector has considerable employment potential.

The first stimulus package had left realtors unhappy. They complained that the existing stock of unsold homes cost much more than Rs 20 lakh, so that the interest rate concession on loans up to Rs 20 lakh would not help their sale.

Public sector banks are now offering homes loans up to Rs 5 lakh at a rate of 8.5% and up to Rs 20 lakh at 9.25%. Urban development minister Jaipal Reddy has also urged Prime Minister Manmohan Singh for taking steps to rev up the real estate sector.

He sought an equal commitment from the sector in the form of price-cuts. “The commitment from the realty sector may include lowering of prices for houses and more and more investments in affordable housing,” Mr Reddy had written to PM.

Source : http://economictimes.indiatimes.com/Economy/IInd_package_to_prop_up_real_estate/articleshow/4019432.cms

Star Home Loan Scheme: Package for new home loan borrowers of BoI

Public sector, Bank of India (BoI) announces a special home loan package for the new customers of the bank. The bank has introduced the package as ‘Star Home Loan Scheme’ and it is almost similar to the one started by most PSU banks to on government’s behest.

Under this scheme, new home loan borrowers of the bank will be offered home loans up to Rs 5 lakh at 8.5% and loans between Rs 5lakh and Rs 20 lakh will be extended at 9.25%. The bank will offer these loans at a fixed interest rate for a period up to 20 years.

Moreover the bank has also revised margin money and waived off both processing fee and pre-payment charges for loans under this scheme. However the bank explained that the scheme ‘would not apply to swapping of loans’. Swapping of loans means take over of loans from other banks or financial institutions.

The main difference between this package and loans offered by other PSU banks is the insurance cover. The bank is offering an additional facility of payment of insurance premium to its new home loan borrowers. In a circular issued by the bank, it was stated: “it will bear the ICICI Prudential life insurance policy premium charges by debiting it as miscellaneous charges in its profit and loss account.”

Presently the home loan customers of BoI get an option of the ICICI Prudential life cover but the premium is paid by borrower.

However All India Bank Employees Association (AIBEA) does not agree with the bank decision to support ICICI, when it already has a tie-up National Insurance Company. They want the bank should rather support the public sector insurance company.

General Secretary of AIBEA, Mr C.H. Venkatachalam said, “Where is the need to support ICICI, and that too by bearing the premium on behalf of the borrower?”

Source : http://www.rupeetimes.com/news/home_loans/star_home_loan_scheme_package_for_new_home_loan_borrowers_of_boi_2031.html

BoI home loan plan for new borrowers

Bank of India has launched a special package — ‘Star Home Loan Scheme’ — applicable only to new borrowers of home loans. The package was launched in mid-December and would be open for six months up to June 30.

While stating that the package is for new home loan borrowers, the bank has, in an internal communication, clarified that ‘it would not apply to swapping of loans’ (take over of loans from other banks/financial institutions).

Besides revising the margin, and waiving the processing and prepayment charges under the package, the bank has decided to offer the loan at a fixed rate (at 8.5 per cent for limits up to Rs 5 lakh and 9.25 per cent for limits between Rs 5 lakh and Rs 20 lakh) up to 20 years.

The circular was not very different from those issued by other banks except on the issue of insurance, where probably, the bank preferred to offer something more to the new home loan borrowers.

Source : http://news.moneycontrol.com/india/news/business/boi-home-loan-plan-for-new-borrowers-/11/36/375473

IOB’s special home loan scheme

Indian Overseas Bank has announced a ‘special package housing loan scheme’ for home loans up to Rs 20 lakh, according to a press release from the bank.

The scheme is in line with the RBI’s announcement last month to support affordable housing and improve credit flow to the housing sector to revive the market. As a part of that announcement, the RBI had said that housing loans up to Rs 20 lakh would be brought under priority sector lending.

The release said the objective of the scheme is to support housing infrastructure. Under the package housing loans up to Rs 5 lakh carry an interest of 8.50 per cent a year and loans of Rs 5 lakh to Rs 20 lakh are charged at 9.25 per cent.

For housing loans under this special package borrowers need to bring in margin money of 10 per cent for loans up to Rs 5 lakh and 15 per cent for loans above Rs 5 lakh and up to Rs 20 lakh. The bank provides free life insurance cover for the borrowers.

Processing charges and prepayment penalty have also been waived under this package, the release said.

Source : http://www.thehindubusinessline.com/iw/2009/01/04/stories/2009010450501500.htm

Home & corporate loans to get cheaper

MUMBAI: Home loan and corporate borrowers have something to cheer about early in the year. Interest rates on home and other loans, particularly for Tax deduction on home loan corporates, are set to fall soon. The Reserve Bank of India (RBI) has cut its key policy rate by one percentage point, signalling a reduction in banks’ lending rate.

This time, banks that many corporates still see as reluctant to lend, have reacted swiftly. Union Bank of India was the first to announce a 25-75 basis point cut in deposit rates across maturities on Friday night.

Allahabad Bank too announced that it would cut its prime lending rate by 75 basis points to 12.5%. Other banks are expected to follow suit over the next few days, after they have reduced their deposit rates.

Private banks, however, may wait a while before they decide to cut rates, according to officials in these banks.
The consensus among bankers is that at best, interest rates could go down by 50-100 basis points. A further cut in lending rates will make cheaper credit available to borrowers and boost demand.
Friday’s package will also give firms under stress, including those in real estate, an opportunity to restructure their loans. In a policy move co-ordinated with the Central government’s stimulus package, RBI on Friday reduced its repo rate, the rate at which banks borrow from RBI, from 6.5% to 5.5%.

The reverse repo, the rate RBI pays to banks for parking funds with it, was slashed by one percent from 5% to 4%, the lowest ever. The cash reserve ratio, the slice of deposits that banks need to park with RBI, has also been reduced by 50 basis points to 5%.

This is the fourth time since early October 2008 that the central bank has eased its monetary policy stance, after having adopted a tight policy since October 2004. The liquidity infused into the financial system through these measures amounts to Rs 300,000 crore.

With Friday’s move, another Rs 20,000 crore will be available for lending. According to Chanda Kochhar, CEO designate, ICICI Bank, interest rates are likely to see a fresh correction. “Interest rates are likely to fall between 0.5% and 1%. In the past, banks had to wait for bulk deposit rates to come down. However, bulk deposit rates have already started falling.”

“Demand for investments will take a little while to pick up as corporates will first wait for their inventory to wind down,” she added.

ICICI Bank had cut rates earlier this week, and Ms Kochhar said the bank has not taken a decision on further rate cuts. She, however, feels there would be simultaneous cuts in deposit and lending rates, a view that senior officials of some state-owned banks do not subscribe to.

MD Mallya, CMD of Bank of Baroda said, “In fact, there is a case of further softening of interest rates, given that there are expectations that inflation will come down further.” A senior HDFC Bank official said the bank would wait and watch before it takes a decision on interest rate cuts. However, he feels there will be a cut of between 0.50% and 1%. A senior Axis Bank official said the bank’s rates are among the lowest, and it is likely to cut its deposit rates first.

According to Ajit Ranade, group chief economist, Aditya Birla group, the impact of the monetary measures on real sector will take time.

“A reduction in interest rates also brings down the treasury yields on bond portfolio of banks, which leads to substantial capital appreciation. As for borrowers, the issue is more of access to credit than cost of credit. In such a situation, banks will make a lending decision based on their risk perception of the proposal. Bank lending will ultimately depend on business confidence,” he said.

MV Nair, CMD of Union Bank of India, said there was adequate liquidity in the system to support the credit growth requirement. ”We expect the demand for credit to go up following the stimulus package,” he said.

Unlike this time round, the measures announced in December by RBI were aimed at certain sectors, including SMEs and real estate. Interestingly, credit growth was quite strong in the previous quarter, during which a series of monetary and fiscal packages were anounced.

SS Kohli, CMD of India Infrastructure Finance Company (IIFCL), said the National Highway Development Authority is expected to sanction projects worth Rs 1,25,000 crore in the next two years.

”Several port projects are also in the pipeline. We expect a robust credit flow to all these projects with the money raised from the market. We would raise the first tranche of tax-free bonds by the middle of next week. Since there is a lag between raising money and its disbursal, we will raise the second tranche as the disbursal of the first tranch progresses,” he said. IIFCL has been allowed to raise Rs 30,000 crore through tax-free bonds.

RBI data indicates that since the beginning of the September quarter, credit growth was higher compared to the same period last year. Since the beginning of October, loan disbursals touched Rs 1,02,061.2 crore, compared to Rs 87,000 crore in the same period last year. Deposits, too, were higher at Rs 1,06,670 (Rs 64,055 crore).

According to Hemant Mishr, MD and head global markets, Standard Chartered Bank, “The repo and reverse repo cut of 50 bps was already factored into the market. Given the aggressive monetary easing, we would expect the bond market to rally significantly. This would lead to deposit and lending rate to ease up further. Given that the government has no more latitude towards fiscal measures, we continue to expect an aggressive monetary stimulus of a further 100 bps repo rate cut and a CRR of 150 over the first half of this year.”

Friday’s package will soothe firms under stress. Loans that were standard accounts on September 1, 2008 would be treated as standard accounts on restructuring, provided it is taken up on or before January 31, 2009. The restructuring package would also have to be in place within 120 days.

Source : http://economictimes.indiatimes.com/Personal_Finance/Loan_Centre/Home_Loans/Home_Loans_News/Home__corporate_loans_to_get_cheaper/articleshow/msid-3928865,curpg-2.cms

LIC Housing plans to disburse Rs 10,000 cr this fiscal

MUMBAI: LIC Housing Finance (LICHF) is planning to disburse loans worth Rs 10,000 crore this fiscal, up from the Rs 7,100 crore last year. 

“During the last financial year, we disbursed loans worth Rs 7,100 crore and our annual target for this year is Rs 10,000 crore,” LIC Housing Finance Director and Chief Executive R R Nair told PTI.

LIC Housing Finance, a fully-owned subsidiary of the Life Insurance Corporation of India, has so far approved over Rs 5,500 crore and already disbursed around Rs 4,500 crore, Nair said.

The company also expects to bring down its Non-Performing Assets (NPA) by fiscal end, he said.

“We have been maintaining our Non-Performing Assets (NPA) year after year. Last year, it was 1.7 (gross) and a net of 0.63. This year we expect it to come down to atleast 1.6,” he said.

Referring to the slowdown in the real estate sector, he said the company was not facing any problem, adding, “there may be a slowdown for builders targeting investors or speculators. I don’t think there is slowness for those who are focusing on genuine end-users,” he said.

“We have been operating in the end-user segment and so have not experienced any slowdown,” he said adding that the end-user segment had a vast potential due to a demand-supply gap of 27 million dwelling units in the country.

“We have a growth rate of 30 per cent plus compared to corresponding period last year. This growth rate is considered to be decent in the current scenario,” Nair said.

Source : http://economictimes.indiatimes.com/Personal_Finance/LIC_Housing_plans_Rs10Kcr_this_fiscal/articleshow/3903870.cms

To kickstart demand, Govt fixes 9.25% rate for home loans below Rs 20 lakh

New Delhi | Mumbai: Public sector banks today said new home loans up to Rs 5 lakh will carry a much lower interest rate of 8.5 per cent. The interest rate on loans of Rs 5-20 lakh will be capped at 9.25 per cent. In India, almost 80 per cent of home loans are below Rs 20 lakh.

Under the scheme valid till June 30, 2009, public sector banks will forego processing fees and pre-payment charges and further provide free life cover. The interest rate will be unchanged for the next five years. Should there be a home loan product at a lesser rate, the bank will match it.

The interest rate will be reset after five years and the borrower will then have the option to go for a fixed rate or a floating rate. The EMI on a Rs 5 lakh loan over 20 years will drop by Rs 1,166 and on a Rs 20 lakh loan by Rs 3,704. At present, loans up to Rs 20 lakh carry a fixed interest rate of 12 per cent.

Experts said the package will work only in Tier II and Tier III cities where one can buy a house for less than Rs 20 lakh. “Fence sitters in such cities may buy to take advantage of the lower rate. But the real problem is people expect prices to drop further. Besides, the outlook for the sector and the economy as a whole remains bleak,” said Anshuman Magazine, CMD, South Asia, CB Richard Ellis.

Source : http://www.indianexpress.com/news/to-kickstart-demand-govt-fixes-9.25-ra…/399006/

Loans to get cheaper as RBI cuts repo rates again

Mumbai: The Reserve Bank of India (RBI) sent a strong signal to banks to lower interest rates on all types of borrowings by cutting the repo and reserve repo rates by 100 basis points. The cuts are part of a mega economic stimulus package to make borrowing more affordable.

With this, the repo rate—the interest charged by the RBI on borrowings by commercial banks—will be down to 6.5 per cent and reserve repo—the rate at which the central bank borrows money from commercial banks—will be down to 5 per cent.

The RBI has, however, kept the cash reserve ratio (the portion of deposits banks have to keep with the RBI) unchanged at 5.5 per cent, stating there was enough liquidity in the system. The statutory liquidity ratio (the portion of deposits banks have to invest in Government securities) has also been left untouched.

In another measure that will result in lower home loans, the RBI has decided that loans granted by banks to housing finance companies (HFCs) for on-lending to individuals may be classified under the priority sector, provided the loans granted by HFCs do not exceed Rs 20 lakh per dwelling unit per family. The priority sector status will enable banks to reduce interest rates on such loans significantly.

The RBI had cut the repo rate from 9 per cent to 7.5 per cent in October-November as a signal to commercial banks to bring down rates, but not many private banks did that. This time, RBI Governor D. Subbarao, while announcing the cut in rates in Mumbai on Saturday, said in no uncertain terms that commercial banks “need to get the signal”.

“We hope that commercial banks (will) act accordingly. It is a matter of time before banks take a decision on interest rates on home loans. Monetary transmission takes time. However, as there is adequate liquidity in the system now and the demand for money is also falling, interest rates will also move down,” Subbarao said.

On Friday, ICICI Bank reduced its interest rate for home loans of Rs 20 lakh and below by 1.50 per cent to 11.50 per cent. Bankers said that with a comfortable liquidity position and fall in inflation, interest rates would now fall across the board.

A reduction in the repo rate will make borrowing cheaper for commercial banks. The cut in reverse repo rate—the first this year—to 5 per cent will make it less lucrative for banks to park funds with the central bank.

The apex bank did not make any changes in the cash reserve ratio (CRR) and the statutory liquidity ratio (SLR). To provide easier credit to micro and small enterprises, the RBI enhanced the refinance facility for the Small Industries Development Bank of India (SIDBI) by Rs 7,000 crore. The RBI is also working on a Rs 4,000 crore refinance facility for the National Housing Bank (NHB).

Commenting on the health of the economy, the RBI governor said, “The outlook for the Indian economy is mixed. Confidence in global credit markets continues to be low, and credit lines remain clogged. There is evidence of economic activity slowing down.”

Among various measures, the RBI also allowed buyback of foreign currency convertible bonds (FCCBs) of companies out of rupee resources. With export growth turning negative, it also said overdue export bills up to 180 days will get credit not exceeding BPLR minus 2.5 percentage points.

Source : http://www.indianexpress.com/news/loans-to-get-cheaper-as-rbi-cuts-repo-rates-again/395198/2

Rate cut tops real estate agenda

New Delhi: Cut in interest rate for both developers and home buyers is the first and strongest demand from major developers as part of the bailout package for the real estate industry that the Prime Minister’s crisis committee is working on.

Infusion of liquidity in the system is next in rank of demands from the industry as this in turn will lead to more credit flow. “We need further cuts in SLR and CRR so that credit is available readily”, Ramesh Sanka, CFO, DLF reasoned.

The cash-starved industry is also finding it difficult to service loans. As a result, it wants an extension of a debt moratorium. “We would like our loans to be re-scheduled by at least one year in view of the present crisis,” said Omaxe executive director (finance) Vipin Agarwal.

Some realty players would also like to get some tax benefits and see section 80 I B of the Income Tax Act restored. However, CEO Ansal API Anil Kumar is not sure about this. “It will be very nice if we could avail section 80 I B benefits but I doubt this happening,” said Kumar. Spending more in the infrastructure sector will help boost the realty sector, thinks Kumar. Another factor bothering the developers is that even though RBI has reduced the risk weightage of real estate from 150 to 100, banks are still very reluctant to lend to this sector. “When we have a piece of land that has licence and all the required clearances, banks are expected to lend promptly. They, instead, are delaying disbursement of sanctioned loans,” said Kumar.

“Besides the rate of interest for developers is as high as 18% to 19%. This needs to be reduced. Also, banks need to lend it to us very swiftly for the sector to pick up,” Kumar pointed out.

Banks can play a more positive role for the industry, point out a few developers. They are allegedly advising home buyers to delay buying it as the prices are expected to crash further. As a result, many prospective buyers are taking a wait and watch mode before they decide to invest.

On the other hand banks are turning away prospective home loan buyers by sanctioning an amount which is less than the amount required by the home loan buyer. These steps are deterring further cash flow and as a result this sector is becoming very static. Realty players think…
the lack of any movement in this industry is not completely because of economic reasons but also because of artificial reasons.

Currently land is very expensive, points out Agarwal of Omaxe. Land constitutes more than half of the input cost of a development. So if land is available at a reasonable price it will have a direct impact on the cost of the project-it will cost less. “A mechanism should be put in place by which land can be available at cheaper rates,” said Agarwal.

A Mumbai-based analyst said if infrastructure status is granted to some segments of the real estate sector, realty will certainly breathe a sigh of relief. He said, “If SEZs and integrated townships are given infrastructure status then it will be a boost for the sector.”

Key demands

• Infusion of liquidity in the system

•Extension of a debt moratorium as servicing loans getting difficult

•Tax benefits & restoration of benefits under section 80 I B of the I-T Act

•More positive roles from banks

Source : http://www.financialexpress.com/news/rate-cut-tops-real-estate-agenda/394042/2

Lull in home loan refinancing

Banks taking over home-loans from housing finance companies, or vice versa, are not uncommon. But a lull appears to have set in with borrowers thinking twice about incurring foreclosure charges and processing fees all over again and lending institutions too not enthusiastic about such takeovers.

Changed scene

The situation, industry insiders say, was different two years back, when the interest rate was going uphill and borrowers, especially those that opted for floating rate of interest, sought a change to fixed rates, fearing a rise in their monthly outgo.

However, with public sector banks competing with each other on the rate front, it made little sense for borrowers to shift their home loans from one bank to another.

But those who have borrowed from tech-savvy private banks, seem to be waiting for an opportunity to shift their loans to housing finance companies or public sector banks.

Borrowers say private banks initially woo customers. “Once you give in, you are caught. The human interface will be out and you will have no choice but to call the toll free number even for simple clarification. The automated service, though available round the clock, can confuse you with its list of options,’” says Mr Sridhar, who took a loan from a private bank initially, but later managed to shift it to a housing finance company.

While accepting that there is a perceptible reduction in the number of applications for take over of home loans, housing finance company sources claim that borrowers still seek their services because of their focus and core competence. They accuse banks of shifting priorities.

Why the shift?

But why would borrowers want to shift? Is it worth paying foreclosure charges and processing fee once again?

While most borrowers think twice before committing to such payments again, Suresh, who works in a private company in Coimbatore, says he opted to shift his home loan from HDFC to State Bank of India about two years ago as the latter offered him the fixed rate plan. “The rate of interest was on the rise then, and I was reluctant to continue with the floating rate.”

So after paying the foreclosure charge of 2 per cent on the outstanding amount, he got his account shifted to SBI.

“The loan mela campaign was on and the bank was offering processing fee waiver and some concession on the rate as well. I was lucky to have got the sanction,” he recalls.

While banks did not mind such loan takeover initially, they have now started to view such accounts with caution, insist on higher margin and take longer time to process and clear the papers.

SBI sources say that there have not been many takeover accounts in recent months.

“The demand has fallen and newer projects are not coming up,” an SBI official observed. To trigger demand, the bank plans to organise one or two more home loan melas before the close of the festive season.

Indian Overseas Bank has also started dissuading people from shifting loans from one bank to another. The bank, while trying to identify eligible fresh takers of home loan, also seems to insist that the salary account of such individuals be routed through the bank.

The issue now appears to be the drag in projects with builders going slow on existing ones and postponing future sanctions as bookings are not happening as in the past.

Banks and housing finance companies admit the slackness, foresee a small correction in the rate but state that their growth rates have not been affected yet. Only time will tell.

Source : http://sify.com/finance/fullstory.php?id=14808558

Banks turn lenient with home loan borrowers facing crunch

Mumbai: Ashish Wagh, a senior executive with a foreign investment bank, recently approached his mortgage lender for a lifeline after his company started cutting jobs and trimming salaries.

Wagh had taken an Rs80 lakh home loan earlier this year to buy an apartment in Bandra, a Mumbai suburb, repayable over 20 years at an annual floating interest rate of 11.75%.

Rising charges: An apartment complex. Interest rates on home loans have increased from 7.50% in 2003 to 11.75% in August, putting pressure on borrowers who had taken loans at floating interest rates. Ramesh Pathania / MintWagh is now considering selling his ancestral property in Pune so that he can immediately repay nearly half the loan amount and avail a two-year moratorium—a legal authorization to delay payments.
He declined to name the mortgage firm because he said that could hurt his negotiations with it.

As interest rates surged earlier this year and companies started laying off staff and tightening employee costs, recovery teams of banks and housing finance firms have, in the past few months, been busy offering at least half a dozen easy repayment solutions to a growing number of borrowers who have been hurt by the slowdown.

Lenders are open to offering easier terms to existing borrowers because they want to prevent an increase in the proportion of non-performing assets (NPAs) on their books and the worth of their collateral—the houses—has declined sharply this year with falling real estate prices.

Banks have extended home loans worth about Rs2.69 trillion as on 29 August, but growth in home loans between 1 September 2007 and 31 August slowed to 13.9% at Rs32,792 crore, from 17% in the previous year, according to the Reserve Bank of India.

Interest rates on home loans have increased from 7.50% in 2003 to 11.75% in August, putting pressure on borrowers who had taken loans at floating interest rates.

For instance, if a person had taken a Rs20 lakh home loan repayable over 20 years, his monthly repayment would have increased from Rs16,418 in November 2004, when the interest rate was 7.75%, to Rs21,674 now.
Housing Development Finance Corp. Ltd, or HDFC, the oldest mortgage lender in the country, is offering its existing borrowers the more common options of stretching the term of the loan without raising the interest rate, or increasing the equated monthly instalments after closing other debts such as personal or auto loans.

“In case a customer is servicing multiple loans such as a housing loan, vehicle loan, personal loan, and has to make the choice to repay, it is advisable that the customer evaluates the loans and decide to repay the loan based on its cost and impact on cash flows,’’ said HDFC’s joint managing director Renu Sud Karnad.

For additional collateral, some lenders are willing to allow borrowers to “balloon” the loan to the end of the tenure or make a large payment towards the end.

Borrowers can also choose to make large payments, or so-called bullet payments, every year so that the term of the loan is trimmed.
Depending on an individual’s future cash flow, Axis Bank Ltd is even allowing borrowers to pledge savings instruments in return for easier repayment terms.

“Depending on the customer’s need we take a three-pronged approach, which includes increasing the tenure of the home loan, keeping the interest rate constant for a limited time frame, and balloning up the loan towards the end of the tenure,” said a senior official at ICICI Bank Ltd, India’s second-largest lender.

“(But) we do not encourage customers to opt for the option of deferring the payment towards the end of the tenure of the loan as it increases the debt burden on the customer. The chances of default also increases,” he added, asking not to be identified because he isn’t the bank’s official spokesman.
Another reason for borrowers seeking a restructuring of their home loans is delays by builders for various reasons.

“Some builders are finding it difficult to complete the housing project on time (and are) hence delaying the possession of the flat. In such cases, banks have seen many customers come to them and ask for a reschedulement of the loan,” said a senior official with Axis Bank.
“All the major real estate developers are seeing a time overflow, hence this is a very common request we are getting from customers,” added this official who wished not to be identified.

Source : www.livemint.com

SBI organises loan mela

Srinagar, Nov 26: The loan mela, organized by the State Bank of India (SBI) here, received a good response with scores of customers visiting the mela on Wednesday.

According to SBI Regional Manager Ajay Gupta, the mela organized in the main branch at Residency road, aimed at making people aware of the facilities being provided by the bank to its customers.

However, the main objective of the mela, which was organized in collaboration with Jamkash Vehicleads Pvt Ltd, was to sanction spot car loan to customers.

The latest models of Maruti vehicles were also displayed at the mela site.
Gupta said besides car loan, the bank offers housing and other loans to its customers.

Gupta and the bank’s Chief Manager B L Jalali said the SBI was also offering complete financial services, including insurance, mutual fund and gold coins.

Jalali said conventional deposits and loan facilities for commerce; industry and agriculture are also available in the bank.
He said the bank pays 10.50 per cent interest on deposits for 1,000 days. However, for senior citizens the rate is 11 per cent.

Source : www.greaterkashmir.com

Realty Market Recovery Hinges on Lower Rates

Recovery in the Indian property market in the next six months hinges on lower home-loan rates to entice first- time buyers.

“Mortgage rates in India are at 12 percent to 13 percent, about twice what they are in China. That is unrealistic,’’ Rajiv Singh, 49, vice chairman of DLF, said in an interview. “If rates are cut, the domestic demand itself will carry the country through this difficult period.’’

DLF lost four-fifths of its market value this year as the highest interest rates in seven years sapped demand for apartments and homes. Finance Minister Palaniappan Chidambaram said this week there is scope for lower borrowing costs after two reductions in a month failed to unblock credit markets.

“It’s tough to say if a cut in interest rates will change the sentiment,’’ said Hugh Young, who manages $2 billion for India Opportunities Fund as the managing director at Aberdeen Asset Management Asia Ltd., in Singapore and holds DLF shares. “In the current environment, people in India will be wary of buying property and stretching themselves.’’

Real estate, automobile and steel companies have cut output and deferred projects to cope with a drop in demand in the world’s second-most populous nation. India has relaxed overseas borrowing rules and initiated a process to allow higher foreign ownership of domestic insurers to ease a credit crunch and infuse confidence.

DLF and Emaar MGF Land Pvt., the Indian unit of the Middle East’s largest real-estate developer, are also cutting prices to revive demand. Goldman Sachs Group Inc. this week forecast some property prices in India will drop 30 percent. Singh said some of the fall has already taken place.

India faces a shortage of about 25 million houses, a figure that may rise to almost 27 million by 2012, Housing Development Finance Corp. estimates.

HDFC, the nation’s biggest mortgage provider, plans to increase lending more than 20 percent this fiscal year, Managing Director Keki Mistry said this week.

DLF is focused on completing projects that need to be delivered and holding back spending on those that have yet to be built, Singh said.

The company has raised 20 billion rupees ($400 million) and plans to borrow another 10 billion rupees in the year ending March 31, securing funds against lease rentals from its office and retail space, he said.

“It is a safe form of financing because you basically discount your lease rentals,’’ said Singh. “We have been quite successful, firstly in generating an operational surplus and raising long-term money.’’

Singh is following a similar strategy for DLF Assets Pvt., whose investors include D.E. Shaw & Co. and Symphony Capital Partners. DLF Assets is majority owned by Singh and his family and buys commercial space from DLF Ltd. About 37 percent of DLF’s second-quarter sales came from DLF Assets, according to India Infoline Ltd. analysts Bhaskar Chakraborty and Param Desai.

DLF Assets may raise about 40 billion rupees by July against assets that yield lease rentals, Singh said.

It is also considering selling shares through an equity placement to raise about 25 billion rupees by the middle of next year, he said. It has appointed JPMorgan Chase & Co. to advise on the sale, he said.

“DLF Assets will be in a position to meet a large portion of its commitment to DLF Ltd.,’’ said Singh. “Hopefully, sooner by equity placement, or by debt raising against the assets it has.

LIC Housing shifts focus to loaning builders

MUMBAI: While the frozen liquidity lines have checked the real estate boom, LIC Housing Finance is disbursing more loans to builders/developers who constitute 6 per cent of their business as against individuals which make up 94 per cent of their business.

“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,” said R.R. Nair, director and chief executive, LIC Housing Finance.

Ground reports suggest builders are now negotiating prices with buyers, although they still refuse to reduce property prices officially. LIC Housing aims to convince builders to bring down prices to a reasonable level by offering easy and hassle-free loans to builders (for new projects).

The idea behind the shift in focus is to encourage individual buyers to book properties. The intention is evident in the loan disbursement target set by the company for the current fiscal. The company plans to disburse Rs 8,000 crore in home loan segment and Rs 2,000 crore loan to builders by the end of the current fiscal, as against Rs 5,900 crore and Rs 1,200 crore respectively in the last fiscal 2007-08.

As of today, LIC Housing has disbursed Rs 5,000 crore, of which Rs 500-Rs 600 crore went to builders. Moreover, it has already approved Rs 6,000 crore loans for which disbursement is due.

In the words of Mr. Nair, this strategy can be coined 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 is funding builders in all projects sizes–big, medium and small. According to the 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. However, Mr. Nair refused to comment on these developments.

In disbursing loans in this distressed economic situation, LIC Housing is however taking certain precautionary measures. The company is now funding estate projects mostly in consortium 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 ensures that the asset value of the securities given by the borrower as collateral is twice the loan value. Thirdly, it meticulously examines the cash flow of the builders in respect of the current depression. LIC Housing also studies the neighbourhood to determine the rationale for pricing a property.

Source : Economictimes.com

NRI Home Loan: A friend for the non-residents

Are you residing abroad and thinking of investing in a residential property in India then NRI home loans are the best option for you. Usually NRIs are doubtful whether they can invest in a residential property in India or not. They are not aware if they can dispatch funds from abroad under the current foreign exchange regulations to make any such purchase in India.

NRI can easily buy any immovable property in India through a number of options. But again the question arises that if an NRI want to invest here and he does not have sufficient funds then what should he do? Under such circumstances an NRI has a ready-made option of NRI home loans in India.

NRI home loans are loans available to Non-Resident Indians for the purposes buying houses that are under construction or for sale. They can also be availed to buy a plot of land or to renovate/improve an existing property. For extending such a loan all banks and housing finance companies go by the definition of NRI as given by RBI – “An Indian citizen who holds a valid Indian passport and who stays abroad for employment or for carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad is a NRI.”

NRI home loans can be availed by any NRI with as much ease and convince as any resident would avail a home loan. However some difference between the two kinds of loans exists in terms of tenure, documents, repayment etc. The home loan rate charged by an NRI does not differ much by the interest rate charged by an Indian for his home loan but the tenure for such loans differs to a great extend. NRI home loans are extended for much shorter period as compared to the normal home loan. The loans tenure for NRIs extends from 7years up to a maximum tenure of15years where as the maximum tenure for a resident is from 25 to 30 years. Also an NRI cannot opt for a loan tenure that exceeds beyond his retirement age or 60years, which ever is earlier.

Besides an NRI can only get 85% of the loan amount and the remaining 15% has to be brought himself by the borrower. This amount can be paid by the borrower through direct remittances from abroad via the normal banking channels, the Non-Resident External (NRE) account and /or Non-Resident Ordinary (NRO) account in India. The loan amount depends on the individual’s gross monthly earnings. This amount is normally up to 36 times of the gross monthly income but there is also a maximum limit on this amount.

Also the documents needed to provide for availing a home loan by the NRIs are different from the residents. They are required to submit additional documents, like copy of the passport and a copy of the works contract, power of attorney etc.

The repayment for an NRI home loan is done through EMIs that includes interest and principal amount calculated on the monthly basis. The borrower can pay the EMIs by issuing post-dated cheques from his (NRE)/ (NRO) or Non Resident (Special) Rupee Account (NRSR) in India or any other account approved by the Reserve Bank of India (RBI). Also for security purpose, banks stress on keeping the first mortgage of the property in their name and if the property is under construction then an additional security such as guarantee of third party is required. This third party can be both a resident and a non-resident of the country.

Home loans are eligible for tax rebate but NRI cannot claim this benefit on home loans in India as they are eligible to pay tax in the country in which they reside and work.

An NRI who wishes to avail a property back in India can accomplish his dream by relying on an NRI home loan. The aspects covered above would have cleared doubts about the sanction and availability of such a loan.

Real estate cos ask for home loan at 7%

NEW DELHI: Real estate players are not willing to cut prices of apartments and houses as suggested by FM P Chidambaram on Tuesday.

DLF chairman KP Singh said that prices have already been cut in the last one year as the industry was facing a slowdown. At present, the company has decided to defer implementation of projects in residential and commercial sectors, instead of lowering prices to increase revenues.

“In hotels, residential and commercial everywhere, the projects deferred because of lower demand and liquidity crisis,” Singh said. He said that high interest rates have affected the demand, adding that present pricing is competitive and linked to supply and demand.

Singh said government should ensure that home loan is available at 7% to prop up demand in the sector as many projects have been closed down by developers.

Parsvnath CMD Pradeep Jain, who is also the president of Council for Real Estate Developers’ Association of India (Credai, Northern Zone) said that prices of on going projects have already fallen to an extent that the profit margins have reduced to single digit due to high inflation, which has increased the cost of construction by 25 to 30% in the last one year.

However, going forward, he said there could be some correction in prices if that of steel and cement go down. At the same time, the developers are constructing smaller size apartments with comparatively low-grade specification. Such steps will lower the per unit cost of apartments.

Jain said unless price of land comes down, the real estate price will not decline. If the developers would not be able to sell them at profit, they will shelve projects, which is happening all over the country now.

He added that reduction in interest rates will help generate demand as it will help common customers. He said government should bring down the home loan rate to 7%.

Jain also demanded that banks should be asked to lend directly to realty companies with a moratorium on repayment for 18 months. At the same time, the realty sector should be given the industry status, which will enable banks to lend to the sector easily. Jain said as the real estate sector creates demand for almost 200 industries, the government should give it due importance and accord it proper status.

Source : Timesofindia

Real Estate Sector- FM assures more loans

Finance minister P Chidambaram assured realty firms that government will impress upon banks to accelerate lending to realty, which is facing one of the worst slowdown in the recent times. A delegation of builders under the Confederation of Real Estate developers’ Association of India (Credai), met Chidambaram on Wednesday to complain against banks’ reluctance to disburse loans to the real estate companies.

A source, who was present in the meeting, said the government accepted that real estate is an engine of growth. At a time when the economy is facing a threat of slowdown, the sector could be used to revive it. Chidambaram, it is learnt, told the delegation that the government will not only help infusing liquidity in the system, but will also work to bring down the interest rates.

In the last couple of years, realty has been affected adversely because of rise in interest rates, which went up from 8% to around 12%. The interest rate was increased because of the sharp rise in prices of real estate assets, which RBI thought could create a bubble. To discourage the price rise, RBI tightened the provisioning norms, making loans to the sector costlier. At the same time, in the last nine months, when the inflation shot up to cross 6%, level RBI started tightening liquidity to keep price rise under check.

Such a steep rise in the interest rates increased the equated monthly instalment (EMI) of a loan for the same period by almost 40%. This has affected affordability factor of buyers adversely and in turn brought down buying of houses. According to the source,FM said the situation has now changed and the policy would also be tweaked accordingly, so that the interest rate on home loan comes down, making it more affordable.

It is learnt that RBI is considering to remove the high risk weightage on the home loan to enable banks to lend at lower rates. At present, banks have to make provisioning of higher capital against the home loan of more than Rs 30 lakh. Because of this, the interest rate of home loan above that slab is around one percentage point higher than that of less than Rs 30 lakh.

Source : www.indianrealtynews.com

Save Lakhs -Shift Home Loan to public sector banks

The Indian government is trying desperately to bring down the interest rates in order to counter the economic slowdown. Indian finance minister met with heads of private as well as PSU banks and advised them to lower lending rates.

Expectedly, several public sector lenders were first to follow the advise. State Bank of India, have lowered their prime lending rates to 13%. Bank of Baroda, Allahabad Bank, Syndicate Bank, Central Bank of India, Oriental Bank of Commerce and Corporation Bank have reduced lending rates by 75 bps to 13.25% with effect from November 10. Dena Bank cut its PLR to 13.5% from 14.25% and, among foreign banks, Citibank lowered its benchmark lending rates by 50 bps to 15% with immediate effect.

However, the rate cuts were largely confined to the public sector banks (with the exception of Citibank). The second-largest bank ICICI and HDFC Bank said they were still maintaining a wait-and-watch stance.

I will hope that the private players will soon lower their rates providing relief to millions of borrowers. In case they do not – does it make sense to move to a PSU bank say SBI?

Here is a scenario analysis for a borrower with who has taken a 9 Lakh loan in 2004 at 7% floating. Let’s assume the current rate is at 12% and remaining principle is 8.30 lakhs.

One of the deterant in moving to other banks is the loan foreclosure fee, which in this case comes to:

Rs 8.30 lakh x 2.5 per cent = Rs 20,750

After accounting for processing fee for new loan (~0.5%), the saving will still be Rs 8 lakh+)

Do keep in mind though that in case of larger loans (30 lakh & above), the rates are more or less same so it’s better to wait.

Source : stockeditor.blogspot.com

Banks see home loan sales reviving

Bangalore: Bankers believe their strained home loan portfolios will see relief in the coming quarters, with interest rate cuts coming into force.

“We expect our home loan offtake to increase by 22 per cent y-o-y next quarter with the fall in interest rates,” said B.R. Pai, General Manager, Syndicate Bank. The bank, which has a Rs 6,500-crore home loan portfolio, saw a slower 18 per cent y-o-y growth in home loans disbursed last quarter, as compared to a 30 per cent growth for the same quarter last year.

Home loans will become cheaper as most public sector banks, including State Bank of India, Canara Bank and Syndicate Bank among others, have cut their benchmark prime lending rates (BPLR) by 75 basis points. Bankers are betting on buyers who had earlier postponed their purchases owing to a high interest rates to come on board.

Kumar Gera, chairman of the Confederation of Real Estate Developers’ Associations of India (Credai), said there is a pent up demand for residential property that will lead to a demand uptake once liquidity returns.

With property prices showing correction in recent times, bankers like C Abraham, General Manager of Union Bank, believe that more genuine buyers will come into the fold. This will see an uptake in home loan disbursals.

“Even Union Bank has been given a mandate by the board to make property purchases for housing our staff and for long term investment purposes.

Valuations are down considerably from ridiculously high levels,” he said. Union Bank has cut home loan rates by 50 basis points to 10.75 per cent. Vijaya Bank, which has seen a slower growth in its home loan portfolio, sees positive sentiment returning to the markets following RBI’s various actions to infuse liquidity. Albert Tauro, CMD, told DNA Money: “Demand waned for our home loans in the last few months. This is the right booster that we were looking for our home loan segment,” he said.

The bank has a Rs 4,000 crore home loan portfolio that grew by just 7 per cent last quarter. A.C. Mahajan, CMD, Canara Bank agrees that the home loan portfolio of banks, which have taken a beating will recover with demand coming in, from well-salaried employees who are risk averse. However, a high-ranking SBI official on condition of anonymity said that offtake of home loans in SBI may not see a huge rise.

SBI will still exercise caution under the tough economic conditions that are persisting, he said. “Loan applications of people from sectors like IT which are seeing layoffs are being more carefully scrutinised to avoid defaults,” the official said.

Source : Sify.com

UPDATE 1-Central Bank cuts PLR, home loan rates

MUMBAI, Nov 7 (Reuters) – State-run Central bank of India (CBI.BO: Quote, Profile, Research) said on Friday it would cut its prime lending rate by 75 basis points to 13.25 percent from 14.00 percent earlier, effective Nov. 10.

The bank has also reduced the floating interest rates on home loans by 25-50 basis points with effect from Monday but kept the fixed interest rates unchanged, it said in a statement.

The revised interest rate on loans upto 3 million rupees would range from 9 percent to 10 percent, while loans above 3 million rupees would carry an interest rate of 10.25 percent to 11.25 percent, depending on the tenure, it said.

On Saturday, the Reserve Bank of India cut banks’ cash reserve requirements by 100 basis points to 5.5 percent, thereby releasing 400 billion rupees into the banking system.

The central bank’s decision prompted lending and deposit rate cut by a slew of state-run banks.

Ahead of the announcement, shares in Central Bank of India shares ended 2.7 percent higher at 38 rupees in a firm Mumbai market.

Source : in.reuters.com

Interest rates on home, car and other personal loans set to fall

High spending consumers can now start planning for taking loans for various reasons as public sector banks and private banks too are going to reduce interest rates on loans therefore home, car and other personal loans are going to get cheaper.

Soon after the meeting with finance minister Mr P Chidambaram, public sector banks led by State Bank of India gave strong signals of cutting interest rates for home and car loans by at least 50 basis points. Earlier country’s largest lender, SBI, had promised to review its lending rates later this week.

In the meeting with Mr Chidambaram, the heads of public sector banks had discussed ways and means to protect the growth momentum from possible adverse effects of the current global financial meltdown.

After the attending the meeting, the heads of banks including UCO Bank and IDBI Bank announced reduction in benchmark Prime Lending Rates (PLR) by 50 basis points. Before the meeting SBI chairman Mr OP Bhatt had said, “Interest rate cut is on our agenda”.

Other banks who have announced reduction in PLR by 50 basis points include the country’s third largest lender, Punjab National Bank, and UCO Bank, IDBI Bank and Union Bank of India.

Interest rates on all loans given by a bank, fixed or floating are linked to the benchmark rate therefore cut down in PLR is of very important. Increase and decrease in interest rates on car, home or personal loans depend on the increase or decrease in PLR.

PNB was the first bank to announce a cut in lending rates and the Union Bank of India announced cut yesterday. Bank of India has also indicated that it would be deciding upon revising of interest rates very soon.

While the largest private sector lender, ICICI Bank, sources said it will be reviewing the lending rates after watching the impact of the liquidity injection steps taken by RBI last week. On Saturday RBI had cut the short-term lending rate by 50 basis points and the cash reserve ratio by 100 basis points.

The meeting was held between the FM and the chiefs of the banks after the Prime Minister and the industry leaders had met to seek appropriate measures to enhance liquidity and other steps to create an environment conducive for lowering of interest rates.

Source : personal-loan-india.blogspot.com

Home Loans Likely To Get Cheaper

After shoring up the banking system with Rs 1, 45,000 crore funds, the Reserve Bank of India has paved the way for cheaper home, consumer, corporate and personal loan rates by reducing its key-short term lending rate (repo) by 100 basis points. The cut in repo would allow banks to immediately borrow short-term funds from the apex bank at a cheaper eight percent as against nine percent till now. Mr. Ashish Parthasarathy, Deputy Treasurer, HDFC Bank said, “It is a welcome step and clearly shows that the interest rate regime is now on a decent curve.” Earlier, the RBI cut the mandatory cash deposits that banks must keep with it (CRR) by 250 points after five years, along with other measures.

Source :  Realty Digest

Banks ready to cut home loan rates by Diwali

NEW DELHI: In what may come as a Diwali bonanza for creditworthy borrowers, many commercial banks are planning to cut home loan rates by about 50 basis points after RBI cut the repo rate on Monday.

The country’s largest lender, the State Bank of India (SBI), is likely to reduce retail home loan rates before Diwali while Punjab National Bank (PNB) and Union Bank of India (UBI) have already slashed rates by up to 50 basis points. But the rate cut of 50 basis points may not be applicable to all types of loans.

Although private home loan providers like HDFC and ICICI are planning to wait and watch as of now, a rate cut by market leader, the SBI, often has a ripple effect on many banks. UBI has cut rates by 50 basis points for loans up to Rs 30 lakh.

The rate cut for loans above Rs 30 lakh, however, will be only 25 basis points. Also, there is the possibility that for loans amounting to Rs 75 lakh and above, the rate cut may be even lower. Sources say some banks may even decide against cutting rates for loans above Rs 75 lakh.

Many banks, including SBI, have put a new ceiling of home loans above Rs 75 lakh; they prescribe a different rate structure for these loans. The government, however, recognises only two types of home loans, those below and above Rs 30 lakh. The former comes under priority sector lending. Also, rate cuts would not be applicable to commercial borrowers like real estate companies.

“Our bank is contemplating a rate cut following the recent measures taken by the Reserve Bank. Though the decision to reduce rates may come at any point in time, it’s expected that the bank would take a decision after seeing RBI’s half-yearly monitory policy on October 24,” an SBI official said.

Banks are also following some tough norms. He said the bank is following stringent norms for deciding an individual’s creditworthiness while allocating loans so that the bank does not fall into a subprime-like trap.

Finance ministry sources said the government is in constant touch with commercial banks to ensure easy liquidity for priority sector loans.

“The government and the central bank have taken a series of measures to infuse liquidity into the system and there is no reason that the banks should be wary of providing credit to genuine borrowers even after that,” an official said.

Economictimes

RBI lowers CRR, home loan rates may fall

The Reserve Bank of India’s move to slash the cash reserve ratio has released Rs 20,000 crore into the market. This may lead to a fall in home loan interest rates. HDFC chairperson, Deepak Parekh, believes the fall in oil prices, moderated inflation and rising liquidity will cap interest rates. “Oil prices are coming down, inflation has moderated. Liquidity was an issue and this move by RBI will infuse liquidity. I am hoping that interest rates have peaked,” says Parekh.

Some analysts say the there could be further good news for borrowers. “I suspect that there could be further cuts in rates before, during or after the credit policy,” say stock analyst Harsh Roongta. Banks aren’t willing to commit themselves on a cut, but say funding will get easier with more money to lend. One needs to watch out for RBI’s credit policy on October 24.
Sourece : Indianrealtynews

SBI will offer reverse mortgage products

The State Bank of India (SBI) will start offering reverse mortgage products for senior citizen on October 12, 2007. Joint loans will be given if the spouse is alive and is over 58 years of age.

The loan will be offered by all branches of SBI from October 12, 2007. The loan will be offered at an interest rate of 10.75% pa and is subject to change at the end of every five years along with revaluation of security. Every five years, bank may even re-adjust the loan installments, if it is needed, depending on market conditions and loan status.

The Chief General Manager for Personal Banking (SBI), Mr. Sangeet Shukla told that there is no upper limit of amount of loan. Also, the maximum period for availing this benefit is 15 years.

Under this loan, borrowers can be avail payment against the security of their houses on monthly or quarter installments or either he or she can go for as a lump sum payment at the beginning.

During their lifetime, the borrower does not have to pay the loan and will continue to stay in their house. Thereafter, either the legal heirs can repay the loan and redeem the property but if this option is not exercised, bank will sell the property and liquidate the loan. Surplus, if any, will be passed on to the legal heirs.

DHFL and Punjab National Bank are the other competitors along with the SBI. Reverse mortgage is very popular product in many countries. The scheme offers old persons with less income to offer their house as mortgage security. The old person will get a loan from the bank and the bank will keep on paying them for a fixed period.

After the time of loan is over, the bank may either, acquire the property and give the remainder to the customer’ heirs or they can pay back and keep the property. The scheme is very good for some people looking for additional money to support their needs at old age.

Source: www.topnews.in