'Rate cut a fillip to Kerala's housing, automobile markets'
The central bank has brought down the bench mark interest rate to 7.75%, attracting positive response from the housing and automobile sectors
Jan 20, 2015
Source : The Times of India


KOCHI: RBI's repo rate cut of 25 basis points last week will serve as a fillip to automobile and home mortgage markets of Kerala, say experts.

The central bank has brought down the bench mark interest rate to 7.75%, attracting positive response from the housing and automobile sectors. While a reduction of 0.25% in interest rate could help existing mortgage-payers save more, it will also spur an increase in the number of first-time mortgage borrowers.

"A decline in interest rates will always prompt potential mortgage borrowers to look for a loan, especially those salaried people who are keenly watching changes in interest rates," said V Anilkumar, lead bank manager for Ernakulam district.

He also said that the rate cut may take a couple of months more to have a visible impact on the number of housing loans in Kerala. "This is because people tend to take mortgages at the beginning of the financial year to maximize their tax benefits on annual financials. Hence, the banks' new mortgage business will be lower during February and March and will pick up suddenly in April," he noted.

Latest figures from the State Level Bankers' Committee, Kerala, show that there are 7.64 lakh home loan accounts in the state as on September 30, 2014. The combined value of all these loans is Rs 29,594 crore, with State Bank of India (SBI) and State Bank of Travancore (SBT) holding maximum outstanding loan amounts.

"The rate cut will definitely help sales as the excise duty has been increased, though it is not an equal set-off. However, it will take a few months to create an impact on the auto market," said John K Paul, president, Kerala Automobile Dealers' Association (KADA). "For small cars, which costs around Rs 2.5 lakh, a cut of 0.25% will have a relatively low impact, compared to bigger cars which costs Rs 25 lakh or above. Hence, this rate cut will be more beneficial to car buyers in that segment," said Paul.

Eldo Benjamin, VP for sales and marketing at Nippon Toyota, Kochi, said the news of rate cut has brought in positive sentiments in the passenger car market of Kerala.

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