Home loan business may revive this festive season
By Joseph Samson
Oct 12, 2007
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New Delhi: With all the major players in Indian home loan market slashing their interest rates, stage is finally set for a revival of the sluggish home loan business. All the banks need this segment to perform if their balance sheets are to look healthy. The market, which went into the doldrums after the continuing rise in floating rate home loans is desperately seeking new home loan customers.

Each bank has set its target for the festive season. SBI is eyeing a home loan business of approximately Rs. 300 crore this festive season, while Bank of Baroda (BoB) has set a goal of Rs 200 crore. However, a common thing with all these discounts is that every bank is considering it as a festive discount. All the banks with the exception of Axis bank have slashed rates only for new home loan customers. Axis Bank is the only one which is extending the benefits of home loan rate cut to both its new and existing customers.

October 31st is a much awaited date for banking sector this year. RBI is expected to announce a monetary policy review on this date. Whether, this discount offered by banks on home loans and other retail loan will continue or not will depend largely on the benchmark lending rates announced by RBI.

Not all of the bankers are optimistic on a rate cut by RBI. Many believe that RBI will stick to the present stand and therefore any further fall in home loan rates would be a distant dream. With the oil prices still heading northwards, inflation is likely to rise and this effect of price rise will have its effect on other sectors of economy.

Another factor inhibiting the home loan rate reduction is the high cost of funds. The deposit rates offered by banks is still high and with these rates banks can't offer substantial discounts on lending rates. However, house is a necessity and those who are serious about buying one will definitely not like to miss out on the festive discounts on home loans and processing fees.

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