Home Loan war is on - Get attractive home loan offers
Kotak Mahindra Bank has announced a special offer of 8.49 per cent for all loan categories, with interest rate linked to retail prime rate in the future. Similarly, ICICI Bank offers home loan at 8.25 per cent for two years.
THE HOME loan war seems to be getting intensive with major domestic lenders such as SBI, ICICI Bank, HDFC Bank and others jumping into the bandwagon. The situation reminds of a similar event seen in 2003 when, foreign banks had lined up to provide home loan at six per cent for first two to three years, followed by floating rates. Earlier this year, State Bank of India (SBI), has launched SBI Easy Loan policy, offering home loans at 8 per cent for first year, 8.5 per cent for next two years - followed by interest rates linked to State Bank Advance Rate (SBAR). HDFC, an another big lender in home loan segment which once described these moves as ‘teaser rates’ also announced a fixed cum floating scheme where it offers home loans at 8.25 per cent for first three years followed by interest rate linked to retail prime lending rates in subsequent years.
However, this time they have given out different reasons such as ample liquidity, improved operational efficiency and good quality portfolios among few. So, the question arises what have made these lenders to jump into lucrative home loan segment and which rates are cheapest at the current conditions?
In the current economic scenario, the credit growth has almost dried, currently growing at little over 10 per cent down from 20-22 per cent a year earlier. The banks’ credit portfolio which comprised mainly of commercial loans, witnessed slow commercial lending due to subdued market conditions and this led to a fall in net interest income, a difference between interest income over interest expenditure. This forced banks to concentrate to home loan borrowers to cover up the losses.
Moreover, the real estate boom after a long two year lull added another spark among prospective buyers, thanks to combined home loan sops from lenders and discount offers from builders. These include low interest rates to new customers. Initially some banks offered nil or reduced processing and documentation charges but they had scrapped it too. But the question arises, would the teaser rates jeopardize cash flows of borrowers if the rates arise in future? The answer lies in the effectiveness of borrowers’ planning.
However, these loans are not that easily available to borrowers. Some prospective home loan borrowers complained that banks have put stringent norms before sanctioning these teaser loans to them. Some of the norms put are compulsory new home, compulsory guarantor, no refinancing, listed developers and increased processing time.
Sanjay Bhange, a prospective home loan borrower applied for a home loan with PNB in last Aug 2009 and got sanctioned his home loan in Nov 2009, that too, after repeated reminders along with a warning for complaint in consumer forum.
So, be prepared for the long wait when applying teaser loans. Also, check the listed developers with them, arrange the guarantor in advance and get all your documents ready before applying for these new home loan schemes.
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