Financial Daily from THE HINDU group of publications
Thursday, Mar 07, 2002
Money & Banking
Housing loan rates seen holding steady
NEW DELHI, March 6
THE interest rates on home loans are showing signs of staying steady at the current levels and are unlikely to soften steeply in the near term despite the recent cut in the administered interest rates by the Government, housing finance companies and analysts say.
The news could dampen the competitive housing loans market, which has over two dozen players who are increasingly learning to work on lower spreads.
``I think the rates have more or less bottomed out,'' said Mr V. Suresh, Chairman and Managing Director of Housing & Urban Development Corporation (HUDCO).
With a large number of fiscal incentives coming its way in successive Union Budgets, the housing finance market has grown substantially in recent years to top a volume of over Rs 12,000 crore annually. This is significantly higher than the Rs 5,700-crore market of three-four years ago.
With 29 housing finance companies already in the fray and more private and nationalised banks set to enter the field, the housing finance market may touch a volume of over Rs 17,000 crore next year, according to analysts.
``The fact that more people are choosing fixed rate loans is a clear indication that interest rates are bottoming out. Customers feel that the rates have already reached their lowest and, hence, there is no significant advantage in taking a floating rate loan,'' Mr Suresh said.
With the Government signalling a ``bias for a softer interest rate regime,'' housing finance companies have lowered interest rates on their loans and public deposits in the broad range of 8.5-9.5 per cent.
Officials with NHB declined to comment on the possibility of a lowering of refinance rates (the rate at which it lends to housing finance companies and banks for lending in this sector).
``The key is whether the RBI cuts the Bank Rate. Then, we have to see whether banks cut their prime lending and deposit rates, '' NHB officials say.
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