Published on: May 16, 2017 @ 17:04
India’s largest private lenders ICICI Bank and HDFC Ltd on Monday have reduced home loan rates to 8.35 per cent on loans up to INR 30 lakh, thereby bringing the rates at par with State Bank Of India (SBI). Now, salaried women borrowers will get home loans at 8.35 per cent and others at 8.40 per cent on loans up to Rs 30 lakh. The reduced rate will be effective from May 15, 2017 for new borrowers.
Following SBI and LIC Housing Finance, ICICI Bank on Monday also announced its decision to slash home loan rates on loans up to Rs 30 lakh by 30 basis points (bps) (100 bps = 1 percentage point) to 8.35 percent from 8.65 percent for salaried female borrowers. For other borrowers it has reduced the rate to 8.40 percent from 8.70 percent to boost affordable housing. In the case of loans above Rs 30 lakh, it will be available at 8.50 percent and 8.55 percent for women and other borrowers respectively.
Further, ICICI Bank will also give new home loan borrowers the option to link their loans to either the six-month MCLR or the one-year MCLR. However, most banks link home loans to their one-year MCLR.
Besides, ICICI Bank said that the customers taking home loans in the affordable segment will also have the option to select either the floating interest rate or a fixed interest rate for the initial two/three years followed by floating rate.
ICICI Bank managing director Chanda Kochhar said the bank is committed to supporting the government’s vision to provide housing for all by 2022. “In line with this commitment, we have reduced the home loan interest rates for the affordable housing segment. With this announcement, customers of Economically Weaker Section (EWS) and Low Income Group (LIG) can avail the dual benefit of low interest rates from us and the Credit Linked Subsidy under the Pradhan Mantri Awas Yojana,” she said. This initiative, along with the bank’s expansion of home loan business in tier II cities, will empower a larger section of customers to realize the dream of owning a new home, she added.
After ICICI Bank’s rate revision on Monday, HDFC Ltd, India’s largest mortgage lender, also followed suit and reduced its interest rates to 8.35 percent on home loans up to Rs 30 lakh. While, ICICI Bank has reduced interest rates by 30 bps from the previous rates, HDFC’s rate reduction is 15-20 bps as it had already brought down rates to 8.50 per cent earlier.
HDFC cut the interest rate by 15 bps to 8.35 per cent for new female borrowers and cut 10 bps to 8.40 per cent for others for loans up to Rs 30 lakh, the lowest being offered and at par with the rates now offered by ICICI Bank, SBI and LIC Housing Finance Ltd. Moreover, HDFC offers the new home loan rates at uniform rates to all borrowers at 8.5 percent for loans between Rs 30 lakh and Rs 75 lakh and for above Rs 75 lakh, it is available at 8.55 percent from 8.75 percent. Prior to this interest rate cut, HDFC had a flat rate of 8.50 percent for all types of borrowers.
Now, SBI, ICICI Bank and LIC Housing Finance and HDFC offer lowest home loans rates at 8.35 percent for women and 8.40 percent for the others.
Last week, State bank of India, India’s largest lender, was the first to reduce interest rates on home loans. It had reduced its home loan rates to new female borrowers by 25 bps to 8.35 percent on loans up to Rs 30 lakh. For loans above Rs 30 lakh, the bank charges 8.50 percent. It will continue to charge 8.60 percent on loans above Rs 75 akh.
Following this, LIC Housing also launched a new home loan product called Griha Siddhi to offer rates of 8.35 per cent to female borrowers and 8.40 percent to the rest for loans up to Rs 25 lakh.
Banks have shown great interest in the affordable housing segment since the government introduced incentives for home buyers in the form of interest subsidies. The government’s ‘Housing for All’ initiative envisages every Indian family owning a house by 2022. Besides, in urban areas housing loans of up to Rs 9 lakh and up to Rs 12 lakh will receive interest subsidy of 4 percent and 3 percent respectively, while in rural areas loans up to Rs 2 lakh will get an interest subvention of 3 percent.
The interest rate competition has resulted in top three lenders offer similar interest rates for new home loans, to gain the momentum created by the government’s support for affordable housing. With this reduction, salaried borrowers can avail home loans at among the lowest rates in the industry. The move brings ICICI Bank’s and HDFC home loan rates in the affordable segment at par with larger rival SBI, which had reduced rates last week. The new rates are expected to be followed by other lenders as well both in private and public sector space to stay in the competition.