PSU BANKS TO OFFER CHEAPER HOME LOANS WITH SLAB REJIG

CHARGE 9.25% FOR 5 YRS ON LOANS UP TO RS 30 LAKH

STATE-RUN banks will now charge 9.25% or less interest rate for the first five years on home loans up to Rs 30 lakh, in a bid to revive housing demand. Banks are working to extend the cap for availing of the special offer to Rs 30 lakh by restructuring their loan slabs and keep the offer open for a longer period, executives said.
    At present, public sector banks offer a special rate of 9.25% for the first five years only on loans up to Rs 20 lakh, under a special scheme open till June 30, 2009.
    Corporation Bank, for instance, would do away with two concessional slabs of up to Rs 5 lakh and Rs 5-20 lakh and replace them with a new slab of up to Rs 30 lakh.
    "We are working on restructuring of slabs for home loans to bring down the lowest slab to Rs 30 lakh. We find that 75% of the demand for home loans is in this segment," the bank's chairman and managing director JM Garg said.
    He said the rate of interest for the first five years will be capped at 9.25% or lower. "There is further room for interest rate cuts and our next asset liability committee is to take a call," Mr Garg added.
    IDBI Bank chief financial officer RK Bansal too confirmed that the bank was in advanced stages of discussions on restructuring of the slabs, while other public sector banks such as Canara Bank have already initiated the exercise.
    The move by government-run banks is expected to revive demand for new homes, which has been tottering since last September. In fact, the December quarter saw almost negligible growth in housing loan offtake compared to the previous quarter. Price cut, schemes draw more buyers
THE demand for lower-priced houses improved in the March quarter, with developers slashing prices and banks opening special schemes.
    Banks saw a spurt in demand for sub-Rs 30 lakh home loans in metropolitan cities as well as tier-I and tier-II cities.
    "While home loans in the sub-30 lakh category industry are seeing a higher growth of around 10-15%, the Rs 30 lakh plus category is showing a growth of 5-10%," said Kotak Mahindra executive vice-president Kamlesh Rao.
    At present, state-run banks charge 9.75-10% on loans of Rs 30 lakh. Monthly payment on a 20-year Rs 30 lakh loan would drop roughly Rs 500 for every 25 basis cut in interest rates.
    Therefore, a rate of 9.25% or lower could leave Rs 1,500 or more in the hands of the buyer every month.
    As per the special IBA (Indian banking Association) package open till June 30, housing loans of up to Rs 5 lakh attract a maximum interest rate of 8.5% in the first one year, while loans between Rs 5 lakh and Rs 20 lakh attract 9.25% for the first five years.

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