| Within reach
Mumbai, Oct. 15: The last word on cheap home loans is not out. The lender to housing-loan agencies says it will charge less. Borrowers will get a better deal if the companies that provide them money pass on the benefit.
Rates at NHB have fallen by 0.40-0.65 per cent, a move that helps banks and firms save on cost of funds. Combine this with the widely held expectation that new Reserve Bank governor Y. V. Reddy’s first credit policy on November 3 will nudge rates lower, and the bonanza for those coveting that dream house looks sealed.
Reddy will not make home loans cheaper, but his anticipated rate cuts could put pressure on housing finance firms and banks to bring down the rates on their loans.
NHB said its refinance rate, the rate at which it lends to home loan firms, has been cut by 0.40 per cent to 6.70 per cent for three-year loans up to Rs 10 lakh. It is 6.9 per cent for three to seven years and 7.10 per cent for seven to fifteen years, a statement issued by it said here today.
Loans above Rs 10 lakh to Rs 1 crore, taken for three years, will now be available at 6.90 per cent, for 3 to 7 years at 7.10 per cent and for 7-15 years at 7.30 per cent.
The rates on floating-rate loans up to Rs 10 lakh have been slashed to 6.50 per cent for seven years and 6.70 per cent for seven to fifteen years. For loans above Rs 10 lakh, the floating rate has been pegged at 6.70 per cent for seven years and 6.90 per cent for seven to 15 years.
In a bid to put rural housing on strong ground, NHB said it would charge 0.25 per cent less on loans to institutions for loans up to Rs 10 lakh. Its refinance rates for agriculture and rural development banks, apex cooperative housing finance societies and regional rural banks has been reduced by 0.25-0.50 per cent. The revised rates will be effective from October 1.
The bank’s loan disbursement increased 10 times to Rs 790 crore for the year ended June 2003 from Rs 76 crore in 2001-02.
Analysts are not sure if NHB’s rate cuts will actually bring down rates for borrowers who go to companies like Housing Development Finance Corporation (HDFC) or to nationalised banks and their arms.
Sources said HDFC’s recourse to refinance from NHB is nominal. “The company’s has been successful in raising funds at rates below 5.5 per cent. So, the move by NHB will not lead to the corporation bringing down rates on housing loans. The impact of the decision, will be felt only by smaller players,” sources added.
Recently, State Bank of India (SBI), having made aggressive strides into housing finance, brought down interest rates on some housing loans. However, two other major players in this segment, HDFC and ICICI Bank, did not follow suit. They maintained that reduction in lending rates depend on their borrowing rates.