DHFL: Home loan rates expected to lower
By Joseph Samson
Jun 23, 2009
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The Dewan Housing Finance Corporation expects lowering of the home loan rates by 25-50 basis points in the near future, as an effect of negative inflation and ample liquidity in the economic system.

The Vice-Chairman and Managing Director of the company, Kapil Wadhwan, indicated, "Interest rates will continue to remain low for some time. There is sufficient liquidity in the system. Inflation has also turned negative. My perception is that home loan rates will come down by 25-50 basis points in the near-term."

Last week, the inflation dropped down to minus 1.61 per cent, for the first time in last three decades. Bankers are divided over the effect of this phase. While some reason that it is transitory, others have been considering revision of interest rates in response to it. Banks have been also under government pressure to lower the interest rates. On April 21 2009, the central bank; RBI reduced the repo and reverse repo rates by 25 basis points.

The ample liquidity is evidenced by multiple aspects - banks have been parking more than Rs one lakh crore in Liquidity Adjustment Faciltity (LAF) window on daily basis, via reverse repo transactions. The Reserve Bank of India unwounded liquidity worth Rs 48,187 crore during March 28-May 23, 2009, via Market Stabilisation Scheme.

The Centre for Monitoring Indian Economy, in its monthly report on Indian economy for June indicated, "Deposit rates have eased by up to 200 basis points since October 2008. It is worth considering a reduction in interest rates on small savings to help deposit rates come down further. Lower deposit rates can help banks lower lending rates further."

Established in 1984, Dewan Housing Finance Corporation Ltd. is into various home loan financing. The company has also tied-up with various developers and builders across the country for developing affordable housing in semi-urban and rural areas.


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