ICICI Bank predicts stable home loan rates for the next one year
By Joseph Samson
Dec 5, 2007
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New Delhi: With a lot of speculation and rumors regarding the future of home loan rates spreading around, ICICI Bank expects the rate to be stable for the next one year. This was stated in an interview by Rajeev Sabharval, Country Head‑Retail and Rural, ICICI Bank .

Placing his views on the issue of fixed vs. floating rate home loans he said that the interest rates are near its peak and though a drop is not expected immediately, they will do so over a longer period. The floating rate interest loans are currently pegged at around 10.5 percent, while fixed rate home loans are offered by banks at around 13 percent. This gap of 2.5 -3 percent, and the fact that the rates are expected to decline, is making the floating loan option more popular among home loan takers.  Commenting on the corrections in property prices Sabharval expected the real estate prices to undergo small corrections in the range of 5-10 percent, but he ruled out any massive change.

Speaking on the bank's performance, he said that the ICICI Bank has a market share of 25-30 percent in all asset classes and it is growing at rates compatible with the market growth. The decline in home loan segment is across the industry and hasn't shown a positive growth. However, the home loan segment, which is currently witnessing a slowdown will pick up once the interest rates start to fall. The auto loans have shown a growth of around 15 percent and going by the market growth will perform at this rate, the home loan market is expected to grow at 15-20 percent, personal loans should grow at a rate of 20-25 percent, while the two-wheeler loan segment, which also didn't perform well during this year should grow between 7 -10 percent.

Despite the 50 basis points hike in CRR by the RBI, which mopped up an estimated Rs.16,000 crore from the market, banks didn't raise the interest rates on home loans and other retail loans. The pressure to reduce the cost of funds however, prompted almost all the major banks to reduce the deposit rates. Small players in the home loan segment are finding it increasingly difficult to sustain the home loan rates at the same level. State Bank of India, is offering a festival discount on home loans interest rate and processing fees till 31 December and to remain competitive ICICI Bank has also extended its festival discount indefinitely. With the interest rates still pegged at the higher end, the borrower's have fled the market and banks are finding it extremely tough to meet their targets. The uncertainty prevailing in home loan market and the recent sub-prime crisis in United States have raised a lot of questions about the home loan interest rates. This statement by Rajeev Sabharval could put a lid on such speculations, at least for the moment.

(Comments Posted : 3) Post Your Comments
1. I really appreciate your post and you explain each and every point very well.Thanks for sharing this information.And I’ll love to read your next post too.
Commodity tips
commodity tips (Posted: May 14, 2011)
2. There is a festival offer going on from SBI till 31st December, which offers home loans at around 10.5 percent floating for new customers.
Ravi Mehta (Posted: Dec 18, 2007)
3. The floating rate of interest for Home Loan is currently 12% per annum since 3-4 months and not 10.5%.

The data given by Rajeev Sabharval is totally wrong.
Please interview him again and interview an ICICI home loan existing customer too before publishing any such fact.
VINAY KUMAR (Posted: Dec 17, 2007)
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