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Banks ready with rate relief for home buyers
UP FOR DISCUSSION
● Cheap loans up to Rs 20 lakh
● Loans up to Rs 20 lakh under priority sector lending
● Interest support from government
● No compromise on prudential norms
● Realtors want relief till Rs 30 lakh

New Delhi, Dec. 14: Banks are keen to offer home loans at an interest rate of 9.25-9.75 per cent for amounts ranging from Rs 5 lakh to Rs 20 lakh.

For loans up to Rs 5 lakh, interest may be as low as 8.25-8.75 per cent, officials said. These rock bottom rates — up to Rs 20 lakh — are for loans till five years.

In the 5-15 year bracket, the rates are likely to be higher by 50 basis points, while over a longer period they will be more by at least 100 basis points.

The Indian Bankers’ Association, which had held discussions with finance ministry officials, will meet in Mumbai this week to finalise the package.

At present, the State Bank of India charges between 9.75 per cent and 10.25 per cent for loan up to Rs 30 lakh of varying tenures. While the lowest rate of 9.75 per cent is for five years, it is 10 per cent for 5-15 years. Beyond 15 years, it is 10.25 per cent.

The Reserve Bank of India wants banks to treat loans of up to Rs 20 lakh as priority sector lending. According to current norms, banks have to lend up to 40 per cent of their total advances to the priority sector, which includes small and medium enterprises, and farms.

The move to include housing in the priority sector will give banks greater leeway in offering attractive home loans.

With deposit rates still in the range of 9-11 per cent, bankers say a drastic fall in lending rates was not possible. Banks will require an interest subsidy to price home loans of up to Rs 5 lakh at rates below 8.25 per cent, officials said.

Bankers have placed the demand for some form of interest support before the finance ministry.

However, both bankers and the ministry seem to have agreed on not compromising on the prudential norms for lending, apart from some concessions on margin money.

“The government and the IBA both feel that any compromise on prudential norms can invite a sub-prime crisis to our shore. We will certainly not risk that,” said the director of a state-run bank.

Realtors, however, want cheaper rates for loans up to Rs 30 lakh. This is because in the metros, loans are usually more than Rs 20 lakh.

Rattled by the slowdown in the economy in the wake of the global financial crisis, the government has targeted housing for relief to lift sentiment.

Last week, while announcing a Rs 20,000-crore growth package for the economy, the government had pledged housing sops.

The board of Reserve Bank of India on Thursday at a meeting in Calcutta had announced a line of credit of Rs 40,000 crore for the National Housing Bank.

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