Real estate developers rallied on Tuesday, April 3, as some banks have cut home loan rates for new borrowers, sparking hope of increased property sales in the country.
DLF Ltd and Unitech rose about 1 percent each after lenders like Canara Bank and IDBI Bank slashed these rates to attract new borrowers.
State-owned IDBI Bank on Friday slashed its floating home loan rates by 25-75 basis points in different slabs. The revised rates will be applicable from April 02, 2012, the bank said in a release. For loans up to Rs 25 lakh, a home loan customer who opted for floating rate scheme in IDBI Bank will see a reduction of interest rate by 25 basis points. For loans between 25 lakh and 75 lakh the cut is 50 basis points while it is 75 basis points for home loans above Rs 75 lakh.
On Sunday, Canara Bank slashed home loan rates by up to 175 basis points (100 basis points equal one percentage points.)
However, the move will only benefit new borrowers while the existing borrowers will have to grapple with the old rates.
Even though bigger mortgage makers such as Housing Development Finance Corp (HDFC) and State Bank of India (SBI) have ruled out any reduction in their home loan rates.
Instead State Bank of India ans State Bank of Travancore have decided to allow home loan customers to reduce their interest burden by allowing them to reprice their existing loans at lower rates. Under this option, borrowers can switch to prevailing floating rates that are at a discount to the prime lending rate. The borrower has to pay a one-time ‘switchover fee’ of one percent of the outstanding loan. The revised lending rate will be linked to the bank’s prime lending rate.
The move is expected to help all those borrowers whose home loans are linked to the prime lending rate which is as high as 14.75 percent at present.However, the switch facility does not apply to those who take home loans on all floating basis.
For borrowers, who have taken loans on all fixed tenure basis, the switch facility can prove beneficial provided the fixed rate is substantially higher. Even home loan buyers under special duel rate schemes can go for a switch after the completion of fixed tenure. During 2009, home loans disbursed were at the rate of 14% on an average.
