SBI: Home loan rates to slash down
By Joseph Samson
Dec 23, 2008
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The country's largest lender has given a reason to respite to a huge number of existing and prospective borrowers by reducing its PLR followed by a reduction in its loan rates.

The rate cut has made SBI home loans rates fall to as low as 9%. Home loans of up to Rs 30 lakh with tenures ranging between 15 and 25 years are extended at 9.5% where as loans of Rs 30 lakh to Rs 75 lakh and those above Rs 75 lakh are available at 10.75% and 11% respectively. The most interesting factor in the slab is a 5-year home loan of up to Rs 30 lakh which it will be available at only 9% against the 9.25% rate offered by all public sector banks on government's command.

However public sector banks are seeking for an interest subsidy for home loans extended to economically weaker sections of the society. They claim that their average cost of deposits which estimate to around 9% is much higher than the lending rates.

In the latest home loan package announced by the government, PSU banks are mandated to offer home loans up to Rs 5 lakh at 8.5% and those between Rs 5 lakh and Rs 20 lakh at interest rate of 9.25%. Hence banking sources say that an interest subsidy of 100 to 150 basis points is required to balance on the low interest rates forced by the government.

A senior executive with PSU said, "The government is already extending a 3 percent subsidy for short-term agriculture loans, while a similar support is being provided for export credit."

Meanwhile, LIC Housing Finance has also announced a cut of 75 to 225 basis points in its interest rates of home loan up to Rs 20 lakh.

With inflation coming down and cost of fund easing, future prospects for the hosing sector look brighter.


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