SBI looking to continue teaser loans beyond March

There’s good news for home loan seekers. State Bank of India (SBI) plans to continue its teaser rate home loan scheme beyond the current financial year, albeit with further tweaks in pricing.

The bank received encouraging response for the scheme in January.

“The growth in our home loans has been Rs1,356 crore in January. We had recorded similar growth even in December. We are considering continuing with the scheme even beyond March 31, but the pricing may be tweaked further. We will see what the finance minister will announce in the budget and based on that we will take a final decision on the same in March,” an official of the bank said, requesting anonymity.

The only dampener may be high real estate prices, which could dampen demand and off-take of home loans, the official said.

SBI has linked its home loan interest rates to the base rate, which is currently at 8%.

Beginning January 1, it has been charging an interest rate of base rate plus 1.50% (9.50%) for loans up to Rs30 lakh and base rate plus 1.75% (9.75%) for loans above Rs30 lakh and up to Rs75 lakh. But till March 31, there is a concession in interest rates. Accordingly, customers can avail loans up to Rs30 lakh at a discount of 1% in the first year (8.5%) and 0.25% for the second and third year (9.25%). Similarly, for loans above `30 lakh and up to Rs75 lakh, the discount will be 1.25% in the first year (8.5%) and 0.50% in the second and third year (9.25%).

Till December 31, the loans were available at a fixed rate of 8% for the first year, 9% for the second and third years, and at the floating rate thereafter.
SBI chairman OP Bhatt said in Davos last month that about 2.92 lakh people were given home loans at teaser rates (8% or the prevailing rates) totalling Rs10,000 crore or so.

Till last November, the teaser rate home loan scheme was also run by many other players, including ICICI Bank and Housing Development Finance Corporation, the two main competitors of SBI in this business. But they discontinued the scheme as the Reserve Bank of India raised concerns about the teaser rate scheme fearing it might increase home loan defaults in the times to come.