SBI cuts home loan rates

SBI cuts home loan rates
ENS ECONOMIC BUREAU

MUMBAI, MAY 13: State Bank of India has become India's lowest lender for home loans as it reduced interest rates on Saturday. Loans up to Rs two lakh would attract an interest of 11.5 per cent per annum as against the earlier 12.24 per cent, SBI said in release here today.

The loan slabs of between Rs two lakh to Rs five lakh and that between Rs five lakh to Rs. 10 lakh have been merged into a single slab of Rs two to Rs 10 lakh attracting an interest of 12.5 per cent per annum, it added. Earlier, the two slabs carried an interest of 13.26 per cent and 13.77 per cent respectively.

The loan slab of between Rs 10 to Rs 15 lakh and above Rs 15 lakh has been brought under a single slab of over Rs 10 lakh with an interest rate of 12.75 per cent. Before the unification of the two slabs, they carried an interest rate of 14.28 per cent and 14.79 per cent respectively, it said.

Last month, ICICI kicked off the current round of interest rate cuts on housing loans when it announced a 50 basis points cut in the rates on its key home loan products.

Later, on May 4, Housing Development Finance Corporation Ltd (HDFC) also cut its retail Prime lending rate for housing loans by 25 basis points to 12.50 per cent per annum. Now, ICICI is planning to introduce a variable rate loan product like HDFC. The rate of interest for the product is expected to be 12.25 per cent thus undercutting HDFC rates which is pegged at 12.5 per cent.

Until now the institution had just fixed rate loan product with three interest rates depending on the tenure of the loan. Between one to five years the rate of interest is 11.25 per cent, between 6- 20 years the rate of interest is 12.75, between 21 to 30 years the rate of interest is 12.85 per cent. HDFC fixed rate home loans are pegged at 13 per cent, down from 13.25 per cent.

ICICI has kept an ambitious target of Rs 1,500 crore for their housing finance portfolio. This is from a sanction of Rs 400 crore and disbursal of Rs 130 crore in the financial year 1999-2000 in the first complete year of operations since the subsidiary ICICI Home Finance came into being.

ICICI plans to expand business to twenty-two towns in the current fiscal. These targets are to be achieved through a hub and spoke arrangement where a relatively big town will function as a hub with neighbouring towns functioning as spokes driving the business. Through this arrangement ICICI hopes to increase lendings by about 25-26 fresh cases every month.

After SBI, ICICI continues to be the cheapest product even after the fresh round of reductions from LIC housing finance Ltd. For loan slabs upto Rs 25,000 the rate of interest is 12 per cent and for laons upto Rs 50,00,000 the re vised rates are 13 per cent for tenures upto 15 years and 14 per cent for tenures upto to 20 years. The interest rates are applicable for loans with collateral security of LIC policy. Rate of interest for loans without LIC policy under "Griha Lakshmi" scheme remains unchanged at 13.5 per cent per annum.

Meawnhile, HDFC plans to increase its business by another 25 per cent. LIC plans to sanction over 60,000 individual loans for Rs 1768.10 crore and disburse over 57,000 loans for Rs 1635 crore. Besides these individual loans, the company plans to sancation Rs 55 crore to corporate bodies, public housing agencies & developers out of which disbursements will be of the order of Rs Rs 50 crore. By end of the current financial year the outstanding mortgage portfolio is likely to cross Rs 5,200 crore.