Banks likely to retain home loan rates

Though the Reserve Bank of India has announced exit from its year-long accommodative monetary policy, major public and private sector banks seem to be inclined towards continuing their cheaper home loan schemes for some more time.

Delhi-based Punjab National Bank has announced extension of its 'Festival Bonanza Offer-2009' for housing and car loans up to December 31, 2009. The country's largest lender, State Bank of India (SBIN.NS : 2322.1 +16.55), is also likely to continue its special home loan scheme offered at an interest rate of 8% starting from Rs 5 lakh.

Though the bank has not announced extension of the tenure of the scheme, it is believed that the scheme will continue beyond November 7, when SBI is supposed to wind it up.

An official of the bank, on condition of anonymity, told FE that the home loan sector of the bank grew by 30% at Rs 8,300 crore during the first half of the current financial year. The bank has projected a growth of 33-34% by the end of the current financial year, which means that the segment should grow by Rs 18,000 crore by the fiscal-end. Home loan comprises 12-13% of the entire loan book of the bank.

As a part of its existing offer, PNB extends housing loans up to Rs 30 lakh at a discounted interest rate of 8.50% per annum (fixed) for first three years and 2-2.5% below BPLR in subsequent years of loan tenure under floating option. Besides this, the bank also offers complete waiver of processing fee and documentation charges on housing loans up to Rs 30 lakh. Margin on housing loans up to Rs 20 lakh has also been slashed to 15%.

The bank has also reduced the interest rate on car loans by 50 basis points, besides permitting relaxation in processing fee & documentation charges.

Even though there has been some impact on the NIM owing to the special home loan scheme, the bank was concerned about the fact that there was slackness in credit pick-up during the first half. Hence, the bank is keen towards putting its fund in those lending schemes that are getting popular day by day and home loans are obvious choices. There is a stimulated interest in home loan market, said a SBI official.

Axis Bank, the third largest private sector bank, is now aggressively pushing its home loan, which can be availed at an interest rate of 8% for the first year. From the second year onwards, these loans will carry a floating rate of interest based on the bank's mortgage reference rate. Based on the current MRR, the rate for the second year and thereafter will be 8.75% for loan amounts up to Rs 30 lakh and 9.25% for amounts above that.

Axis Bank will provide on-spot approval and wave loan processing fees for prospective buyers signing up at the 'Home for All' expos organised by it in major cities. This follows the tremendous success of a similar event organized last year. These will showcase a wide array of properties, across price points (Rs 5 lakh to Rs 5 crore) and category of properties (site, flats, houses and villas).

The first of these fairs will be organised in Bengaluru from November 6, 2009.