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Realty gloom over home loans

Posted on Dec 27, 2016
Though real estate prices have corrected in certain geographies and home loan rates have fallen by 30-50 basis points (bps) in 2016 from the previous year, there has not been much demand for home loans. Transmission of rates from the central bank to loan products was the theme for the year.

Interest rates
The Reserve Bank of India (RBI) cut the repo rate by 50 bps through the year. This is the rate at which the central bank lends money to commercial banks in case of a shortfall. The falling interest rate trend began in 2015 and continued in 2016. “Thanks to the falling interest rate environment, there was a 30-50 bps cut in home loan rates,” said Naveen Kukreja, co-founder and chief executive officer, Paisabazaar.com.

However, transmission was slow as banks did not pass on the benefit to end users.

There was, however, a big change in benchmark lending rates. Till 31 March, all floating rate loans were linked to base rates.

On 1 April, that changed to marginal cost based lending rate (MCLR)—the new benchmark rate at which banks will lend to new borrowers. MCLR is built on four components—marginal cost of funds, negative carry on account of cash reserve ratio (CRR), operating costs and tenor premium. “With the introduction of MCLR, there is a straight 40 bps cut in the home loans. If base rate is 9.30%, our 1-year MCLR linked to home loan is 8.90%. More or less, the banking industry has followed this,” said M.G. Vaijinath, chief general manager-real estate and housing department, State Bank of India, the countrys largest lender. All new floating rate home loans are linked to 6-month or 1-year MCLR.

Fees and charges
Bankers say there is a shift in other charges as well for home loans. “Typically, the service charge or other charges for a home loan used to be a percentage of the loan amount, and range between 0.25% and 0.50%. That has been coming down to a flat fee of, say, Rs10,000-20,000,” said Sumit Bali, senior executive vice-president and head-personal assets, Kotak Mahindra Bank Ltd.

New avenues
Financial institutions have been focusing on digital products to provide faster services. Many banks have tie-ups with portals such as Bankbazaar, Deal4loans and Paisabazaar to get customers on board. “We have also seen banks getting comfortable with providing home loans online from the application to disbursal. Also there are multiple banks that are working towards building a back-end digital platform,” said Kukreja.

You may see more online home loans next year.

The year also saw the launch of differentiated home loan products. For instance, SBI launched home loans targeted at government employees and defence personnel. “When the Pay Commission was announced, we thought we should offer flexible repayment option for government employees since they tend to buy a house after 45 years of age, when only 10-15 years of their earning life remains,” said Vaijinath.

Banks also saw an uptick in overdraft against home loans.

What next?
Despite a fall in interest rates and price correction in the real estate market, the overall loan market has not grown. This may continue for the first few quarters in 2017. “After the demonetization drive settles, home loan demand will revive. Interest rate is likely to soften because inflation may soften further. Theres a downward interest rate bias,” said Bali.

If you are planning to take a loan, go for a floating rate loan. Also check for all charges besides the interest rate.

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No rate cut a let down for realty in Mumbai

Posted on Dec 09, 2016
Interest rates on home loans and EMIs will stay the same, with the Reserve Bank of India on Wednesday keeping the repo rate unchanged.Builders and realty experts hoped there would be a reduction in interest rates of home loans to ease the stress caused by Centres demonestiation decision. While the RBI kept the rate unchanged at 6.25 %, it was hop ...
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Indiabulls Housing Finance slashes home loan rates by 15 bps

Posted on Dec 02, 2016
MUMBAI: Indiabulls Housing Finance Limited today joined the rare war by cutting home loan rates by 15 basis points to 9.15%.For loans of up to Rs 28 lakh the rates will be 9.15%, for loans between Rs 28 lakh to Rs 75 lakh the rates will be 9.15% for women borrowers and 9.20% for others.New rates will be effective from November 4.Indiabulls Housing ...
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After SBI, ICICI Bank slashes home loan rate by 0.15%

Posted on Nov 25, 2016
New Delhi: Private sector lender ICICI Bank today announced a cut in home loan rate by 0.15 percent for new borrowers, joining the rate cut initiated by bigger rival SBI.Home loans up to Rs 75 lakh for women borrowers will now attract an interest of 9.15 percent from the earlier rate of 9.30 percent, according to the ICICI Bank website.At the same ...
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Currency pullback can push prices down

Posted on Nov 22, 2016
A significant reduction in black money in the economy following the governments decision to withdraw old higher denomination currency notes may have a substantial impact on the real estate sector as the move can reduce the number of unaccounted transactions in the secondary market to a great extent. But that comes as good news for homebuyers as a ...
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Axis Bank cuts interest rates by 0.15 percentage point

Posted on Nov 17, 2016
Axis Bank, one of Indias top two private banks, has cut its lending rates by 0.15 percentage points in the wake of the ongoing currency exchange program.With this, the banks ‘marginal cost-based lending rate has been reduced to 9.05% for one year and 9.15% for three years.The change will come into effect from Nov 18.This would reduce the monthly ...
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Loan rate may in Kolkata

Posted on Nov 17, 2016
Home loan customers could see EMIs reduce by a fourth and prospective buyers may be able to buy a larger home, feel real estate developers in the city following SBI chairman Arundhati Bhattacharyas iteration that interest rate on loans will decline as banks are now flush with money following the demonetization.Nandu Belani, president of the Bengal ...
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Developers hope home loan rates will fall

Posted on Nov 15, 2016
Chennai: The developer community is hoping for a home loan interest rate correction in the offing rather than a real estate price correction on account of demonetisation of 500 and 1,000 currencies.Developers' body Confederation of Real Estate Developers' Association of India (CREDAI) has expressed the hope that the home loan rate would go below 7% ...
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HDFC cuts Home Loan rates

Posted on Nov 08, 2016
After ICICI Bank, HDFC also announced a reduction in its Home Loan rates of up to 15 basis points, effective 4th November, 2016.“Over the past couple of months we have seen a drop in our marginal costs of funds and as always HDFC has ensured that benefit is passed on to its customers” said Ms.Renu Sud Karnad, Managing Director, HDFC Ltd .For loans ...
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Indiabulls Housing Finance reduces Home loan Rates by 15 bps

Posted on Nov 08, 2016
Indiabulls Housing Finance Limited announced its revised home loan rate of 9.15%, a reduction of 15 basis points for its customers, effective 4th November.Gagan Banga, Vice Chairman and Managing Director, Indiabulls Housing Finance said, “We havealways strived to provide our customers with superior services & the most competitive rates. Areduct ...
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SBI cuts home loan rate by 15 bps

Posted on Nov 03, 2016
State Bank of Indias customers may find servicing new home loans relatively easier on their pocket, with the equated monthly instalment (EMI) coming down by Rs. 11 per ₹1 lakh loan, following the bank paring its benchmark interest rate by 0.15 percentage points.Indias largest bank on Wednesday said it has cut interest rates by 0.15 percenta ...
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ICICI Bank rolls out overdraft facility against property

Posted on Nov 03, 2016
ICICI Bank has launched a credit facility against home loans for salaried customers.The Home Overdraft facility will enable a salaried customer to seek loans up to Rs. 1 crore for personal needs against his/her property.In a statement, the bank said: "This offering provides customers with the dual advantage of a term loan and an overdraft facility. ...
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DHFL Cuts Home Loan Rates to 9.35%

Posted on Oct 18, 2016
Enabling home ownership to the LMI customer with an extensive distribution network in the tier 2 & 3 cities and townsDHFL, Indias leading housing finance company in the low and middle income segment, announced reduction in its interest rates by 20 bps to 9.35% for its new customers with effect from October 11, 2016. The Company will offer the ...
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PNB joins SBI to woo Central government staff with cheaper loans

Posted on Oct 13, 2016
Taking a cue from its bigger peer State Bank of India, public sector lender Punjab National Bank (PNB) has come out with special home and auto loan offers to attract Central government employees who are flush with cash after the bonanza handed out to them with the implementation of the recommendations of the 7th Central Pay Commission (CPC).The sch ...
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Right on the money

Posted on Oct 13, 2016
PuneAre planning to make prepayment of your home loan? Here are some tips.Here are some simple ways to generate funds for a part prepayment on your home loan that will help you bring down the overall cost of the finance. You can either reduce the EMI or tenure of your loan. A part prepayment on a home loan helps in reducing the interest burden and ...
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SBI Offers 'Hope Loans' At Reduced Interest Rates

Posted on Oct 06, 2016
New Delhi: SBI on Friday announced the launch of a special financing scheme 'Hope Loans', under which customers can avail credit facility at lower rates."Hope Loans comes with the added benefit of reduced interest rates that SBI has just announced due to the reduction in the marginal cost of lending rate (MCLR). On an Rs. 50 lakh home loan, for exa ...
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Since January 2015, RBI has cut rates by 150 bps. Here's how little has reached you

Posted on Oct 04, 2016
MUMBAI: With banks turning stingy in passing on RBI's rate cuts to consumers, rate of home loans has fallen by only 0.26 percentage point since 2015, but corporates have managed to bring down their borrowing cost by 1.44 percentage point by tapping bond markets, as per the central bank.Between January 15, 2015 and April 5, 2016, Reserve Bank of Ind ...
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Cost of funds for corporates dips twice as fast as home loan rates

Posted on Aug 31, 2016
Mumbai: Outgoing RBI governor Raghuram Rajan has said that banks are reluctant to pass on rate cuts to boost their earnings that have taken a hit due to bad loans.Although bank customers are not getting the benefit of rate cuts, corporates have been able to bring down their cost of funds by issuing bonds and commercial papers (CPs), which are short ...
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Kotak Mahindra Bank cuts home loan rate, waives foreclosure charges

Posted on Aug 24, 2016
Kotak Mahindra Bank said it is now offering a lower home loan rate of 9.35% as part of a festive season discount and will also provide business loans and overdraft at up to 1% lower interest rate with 25% waiver on processing fees till 10th September.SBI already offers home loan rates of around 9.3%, while ICICI Bank charges 9.4% and HDFC Bank char ...
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Home buyers may have to wait... rates unlikely to fall

Posted on Aug 24, 2016
Mumbai: Prospective home and car buyers who were holding their breath might as well exhale as interest rates are unlikely to fall anytime soon.Designated RBI Governor Urjit Patel is seen by many as much as an inflation hawk as outgoing Governor Raghuram Rajan and is likely to continue with his predecessor's hawkish stance.It was the committee heade ...
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