Ravi Padmanabhan (padmania@gmail.com)
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CHENNAI: The lure of low interest rate in the first few years on home loans is becoming one of the significant factors behind the increased disbursement of the loans in Chennai.
Many banks and housing finance companies (HFCs) reduced the interest rate recently and there is expectation of a further cut.
“Low interest rate on lending, relatively affordable property prices and income confidence among people have become the major reasons for recent bookings and more home loan enquiries in Chennai,” said R.R. Nair, Director and Chief Executive of LIC Housing Finance Ltd.
The company had announced an interest rate of 8.75 per cent floating for home loan up to Rs.75 lakh and a fixed rate of 8.9 per cent for first three years. It had also cut interest rates for new loans by 0.5 per cent effective from August 1.
According to Indian Bank, 843 people in the city have enquired about home loans with it this month mainly because of the affordable interest rate.
A total of 562 in-principle sanctions, totalling Rs.91.66 crore, have been given.
Indian Bank recently announced a festival offer of home loans, with a fixed rate of interest of 8.25 per cent for the first three years, for home loans up to Rs.20 lakh. A fixed rate of interest of 8.50 per cent for first three years, for home loans of Rs.20 to 30 lakh, 9 per cent fixed for Rs.30-50 lakh and 9.25 per cent fixed for above Rs.50 lakh for first three years, followed by Benchmark Prime Lending Rate (BPLR) related rate of interest, fourth year onwards, has been announced.
“We expect a good response from the Chennai market,” said the spokesperson of the bank.
Upward trend
Takeover of home loans by Indian Bank is about 20 per cent in its total disbursement, while the rest is towards new home loans. According to officials of the bank, home loan for purchase of flats is becoming more popular now.
The average loan for Chennai region is about Rs.16 lakh for Indian Bank.
State Bank of India, which also reduced the rate of interest sometime ago, has been witnessing an uptrend in the conversion of home loan enquiries in Chennai, according to officials. It had cut rates by 50-75 bps for high-value loans and offers loans up to Rs.5 lakh at 8 per cent fixed rate for five years.
However, the average value of home loan disbursed in the city by SBI has been reducing. The home loan for premium segment housing is yet to improve, according to an official of SBI.
HDFC has revised the interest rate on loans between Rs.15 lakh and Rs.50 lakh to 9 per cent from August 12. The earlier interest rate was 9.5 per cent.
Direct impact
“Decrease in interest rates has a direct impact on the housing market as it decreases the monthly EMIs or the total number of EMI payments, depending on what the customer prefers. Reduced interest rates have an impact on the affordability of paying a home loan,” said Ramesh Nair, Managing Director-Chennai, Jones Lang LaSalle Meghraj.
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Padmanabhan
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