PSU banks rate cut
PSU banks cut rates, but it may not help much
New Delhi: All PSU banks on Monday bowed to government pressure and announced halfmeasures for giving the faltering housing sector a leg-up. So, all 26 of them came up with a concessional home loan rate scheme that is limited to loans up to Rs 20 lakh — a step described as ‘‘window-dressing’’ by housing companies. They felt this was unlikely to breathe life into a comatose property market, especially in the big cities.
These concessional loans will be available only to new borrowers (ostensibly to attract new buyers into the property market) but offer no help to existing borrowers who are groaning under a steep increase in loan rates. These banks — and other private banks and housing finance companies — had speedily hiked interest rates when overall rates went up, but have been slow to reduce home loan rates when money has otherwise become cheaper.
PSU banks will charge 8.5% per annum on home loans up to Rs 5 lakh and 9.25% on those between Rs 5 lakh and 20 lakh. This, theoretically, should give some sort of fillip to housing in Tier Two cities, but property builders sounded sceptical.
Bank of India CMD T S Narayanasami said, ‘‘The concessional rate will not apply to new loans taken for swapping existing home loans.’’ That leaves old borrowers with no way of benefitting from the scheme. Also, none of the really big private sector home loan disbursers, such as HDFC or ICICI, have indicated that they will also introduce concessional loans.
The new rates will effectively act as a ceiling for the first five years of loans taken now, after which they can be reset. Within the first five years, if interest rates fall below these concessional rates, banks will charge the lower of the two.
The scheme has some additional benefits. For loans up to Rs 5 lakh, borrowers will need to make a down payment of only 10% of the cost of the property, while for loans above this amount, the down payment will be 15%. The current proportion is between 15% and 20%.
HALFWAY HOUSE
MEASURES
Interest rates on home loans up to Rs 5 lakh capped at 8.5%
Rates for loans of Rs 5 lakh-20 lakh not to exceed 9.25% for first five years
No processing fee or pre-payment charges for home loans under these categories
Free insurance cover for loans up to Rs 20 lakh
CAVEATS
Available only for new housing loans from PSU banks from Dec 16 to June 30, 2009
Will not apply to existing customers even if they swap loans from existing bank to another PSU bank
Many customers complain that recent cuts in floating home loan rates have not been passed on to them
No processing fees on home loan
New Delhi: No processing fees will be charged for concessional home loan against 1.5% charged at present. No pre-payment penalty will be imposed if a borrower wants to repay the amount ahead of the repayment period. Currently, a borrower has to pay a prepayment charge of around 2% of outstanding amount.
The scheme, which will remain effective till June 30, 2009, has also put the onus on the banks to provide life insurance coverage up to oustanding amount of the loan till it is repaid. In the case of a home loan of Rs 20 lakh, this will mean the bank will have to pay a premium of around Rs 12,000 in the first year.
The concessional rate of 8.5% on loan of Rs 5 lakh, against the present rate of 10.25% offered by SBI, will lead to a reduction in EMI by around 12% from Rs 4,908 to Rs 4,339. In the case of a Rs 20 lakh loan, borrower will save 7%. However, developers say the scheme will not provide much respite to home buyers in major cities. ‘‘Hardly any property is available for Rs 20 lakh in places like NCR, Mumbai, Chennai and Kolkata,,’’ said Anshuman Magazine of CB Richard Ellis.
TOI: 16/12/2008
New Delhi: All PSU banks on Monday bowed to government pressure and announced halfmeasures for giving the faltering housing sector a leg-up. So, all 26 of them came up with a concessional home loan rate scheme that is limited to loans up to Rs 20 lakh — a step described as ‘‘window-dressing’’ by housing companies. They felt this was unlikely to breathe life into a comatose property market, especially in the big cities.
These concessional loans will be available only to new borrowers (ostensibly to attract new buyers into the property market) but offer no help to existing borrowers who are groaning under a steep increase in loan rates. These banks — and other private banks and housing finance companies — had speedily hiked interest rates when overall rates went up, but have been slow to reduce home loan rates when money has otherwise become cheaper.
PSU banks will charge 8.5% per annum on home loans up to Rs 5 lakh and 9.25% on those between Rs 5 lakh and 20 lakh. This, theoretically, should give some sort of fillip to housing in Tier Two cities, but property builders sounded sceptical.
Bank of India CMD T S Narayanasami said, ‘‘The concessional rate will not apply to new loans taken for swapping existing home loans.’’ That leaves old borrowers with no way of benefitting from the scheme. Also, none of the really big private sector home loan disbursers, such as HDFC or ICICI, have indicated that they will also introduce concessional loans.
The new rates will effectively act as a ceiling for the first five years of loans taken now, after which they can be reset. Within the first five years, if interest rates fall below these concessional rates, banks will charge the lower of the two.
The scheme has some additional benefits. For loans up to Rs 5 lakh, borrowers will need to make a down payment of only 10% of the cost of the property, while for loans above this amount, the down payment will be 15%. The current proportion is between 15% and 20%.
HALFWAY HOUSE
MEASURES
Interest rates on home loans up to Rs 5 lakh capped at 8.5%
Rates for loans of Rs 5 lakh-20 lakh not to exceed 9.25% for first five years
No processing fee or pre-payment charges for home loans under these categories
Free insurance cover for loans up to Rs 20 lakh
CAVEATS
Available only for new housing loans from PSU banks from Dec 16 to June 30, 2009
Will not apply to existing customers even if they swap loans from existing bank to another PSU bank
Many customers complain that recent cuts in floating home loan rates have not been passed on to them
No processing fees on home loan
New Delhi: No processing fees will be charged for concessional home loan against 1.5% charged at present. No pre-payment penalty will be imposed if a borrower wants to repay the amount ahead of the repayment period. Currently, a borrower has to pay a prepayment charge of around 2% of outstanding amount.
The scheme, which will remain effective till June 30, 2009, has also put the onus on the banks to provide life insurance coverage up to oustanding amount of the loan till it is repaid. In the case of a home loan of Rs 20 lakh, this will mean the bank will have to pay a premium of around Rs 12,000 in the first year.
The concessional rate of 8.5% on loan of Rs 5 lakh, against the present rate of 10.25% offered by SBI, will lead to a reduction in EMI by around 12% from Rs 4,908 to Rs 4,339. In the case of a Rs 20 lakh loan, borrower will save 7%. However, developers say the scheme will not provide much respite to home buyers in major cities. ‘‘Hardly any property is available for Rs 20 lakh in places like NCR, Mumbai, Chennai and Kolkata,,’’ said Anshuman Magazine of CB Richard Ellis.
TOI: 16/12/2008