ICICI Bank, HDFC match SBI, cut home loan rates by up to 30 basis points
ICICI Bank and HDFC Ltd slash home loan rates by up to 30 basis points for borrowers taking loans up to Rs30 lakh to boost affordable housing
Mumbai: Housing Development Finance Corp. Ltd (HDFC), India’s largest mortgage lender, on Monday cut interest rates on home loans of up to Rs30 lakh by 15 basis points for new borrowers, to gain from the momentum created by the government’s support for affordable housing.
HDFC cut the interest rate to 8.35% for female borrowers and 8.40% for others for loans up to Rs30 lakh, the lowest being offered and on par with the rates now offered by ICICI Bank, State Bank of India (SBI) and LIC Housing Finance Ltd.
One basis point is one-hundredth of a percentage point.
For loans up to Rs75 lakh, HDFC kept interest rates unchanged at 8.50%.
On Monday, ICICI Bank slashed its interest rate on loans up to Rs30 lakh by 30 basis points to 8.35% for salaried female borrowers. For other borrowers it has cut the rate to 8.40%.
State bank of India, India’s largest lender, was the first to reduce interest rates on home loans of up to Rs30 lakh by 25 basis points, earlier this month. Following this, LIC Housing too introduced a new home loan product called Griha Siddhi, which aims at giving loans to female borrowers at 8.35%.
Banks have shown great interest in the affordable housing segment since the government introduced incentives for home buyers in the form of interest subsidies.
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The government’s Housing for All initiative envisages every Indian family owning a house by 2022. For housing loans up of to Rs9 lakh, the government will provide a 4% interest subsidy, and for those up to Rs12 lakh, it will give a 3% interest subsidy.
Another reason behind banks’ focus on the housing segment is the lack of demand for credit from other sectors of the economy. In the two years to March 2017, credit to industry grew 0.76%. In comparison, personal loans grew 39% and mortgages rose 36%, show data from the central bank.
“Post demonetization, banks have sharply reduced their marginal cost of lending rate, compressing the yield spread between banks and housing finance companies...” said Udit Kariwala, senior analyst at India Ratings and Research.
One of the factors of banks aggression in the housing space is on account of weak demand for corporate credit, he said. “Competition is heating up in this segment and banks with their inherent cost advantage would keep the pressure on housing finance companies,” Kariwala said.
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