The home loan market war intensified with ICICI Bank offering a fixed rate of 8.25% for two years. The scheme is open between December 1, 2009, and January 31, 2010. The first disbursement of the loan must be availed of before March 31, 2010, the bank clarified. ICICI said the rate is applicable to every segment. From the third year onwards the bank would charge floating interest rate depending upon the then prevailing floating reference rate. ICICI bank’s retail loan portfolio has fallen to Rs86,400 crore in the second quarter of the current fiscal from Rs1,22,500 crore in the comparable period last fiscal.
Of its total retail loans, 57% were mortgages in the last quarter, equivalent to Rs49,300 crore. State Bank of India (SBI) was the first to come up with low-priced home loans.
A senior SBI official said the lender’s “My Home” campaign will continue till March 31.
Pioneer HDFC and ICICI are vying for a piece of the market that SBI currently dominates.
Harshvardhan Roongta, CEO, Apnaloan, says 2- and 3-year fixed-rate loans are very popular now and the highest business traction is from the lower end of the mortgage loans segment of under Rs20 lakhs. “In metros the Rs20-50 lakh segment is performing well,” Roongta said. Though bigger banks are busy luring the home buyers through these schemes, the smaller players in the mortgage market are preparing to close their schemes.
Axis Bank, which had started a home loan exposition last month, is closing its offering of fixed interest rate of 8% for 12 months on December 10.
It has already reverted to normal lending with a floating interest rate of 8.75% for loans up to Rs30 lakhs and 9.25% for loans above Rs30 lakhs. S Govindas, general manager, personal banking and operations, Union Bank of India, said his bank does not have plans to continue with lower interest rates either.
“Our festive offer of giving loans up to Rs50 lakhs at 8.5% fixed for three years closes on January 15, 2010,” Govindas said. R R Nair, director and chief executive, LIC Housing Finance, said currently the lender is offering two schemes —- 8.75% floating for loans up to Rs75 lakhs and 8.9% fixed for first three years for loans up to Rs75 lakhs.
“Keeping in mind the current market costs there are no plans as of now to lower interest rates,” Nair said. There are also others who are considering dipping their toes. Sanjay Shukla, business head at Tata Capital Housing Finance, says he is watching the situation “will take a call at an appropriate time”. Tata home loan rates range between 9 and 9.75%. A realty analyst from a domestic brokerage said private banks will have to increase rates by 25-50 basis points before the Reserve Bank of India norm on non-performing loans kicks in next year.
“Everyone is trying to enlarge their mortgage portfolio through such schemes. At present they have the cash to do so, but this scheme will bring down their net interest income,” the analyst said. Net interest income, or interest earned minus interest expended, is the key profitability metric of banks.
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