SBI home loan customers to get only 50% benefit of cut in base lending rate
Oct 05, 2015
Source : Toi

MUMBAI: The euphoria over State Bank of India's 40 basis point (0.4 percentage point) reduction in interest rates is likely to get watered down considerably for home buyers. India's largest bank has said that the interest rate on new home loans will be only 20 basis points lower -less than half of the 50 basis point reduction in benchmark rates by the Reserve Bank of India.

This 40 basis point reduction in the bank's base rate will not fully apply to new home loan customers because the bank has revised the spread at which it will advance home loans for borrowers to 20 basis points above its benchmark base rate as against offering loans at base rate earlier.

Sources said that the bank had taken a decision to revise the spreads to protect its margins since the rate cut has been front-loaded without an equivalent reduction in the cost of funds.

SBI takes lead, lowers EMIs after RBI cuts repo rate

SBI's decision to cut interest rates on new home loans by only 20 basis points is a rare instance where old borrowers stand to gain more than new customers. A woman borrower who had taken a loan in the first week of October would get home loans at the base rate that is 9.7%.

Following the revision in the base rate, the borrower would see her loan rate coming down to 9.3% (base rate) in the next quarter. However, if she delayed taking the home loan to October 5, she will be able to avail the loan at only 9.5%. The lending rates applicable to women will also apply to joint loans where the first borrower is a woman. For all other borrowers, the interest rate would be 5 basis points higher (9.55%).

Sources said that the bank had taken a decision to revise the spreads to protect its margins since the rate cut has been front-loaded without an equivalent reduction in the cost of funds. SBIchairman Arundhati Bhattacharya had earlier suggested that the bank be allowed to come out with a teaser loan-type scheme to incentivize new borrowers. However, the RBI has not been very conducive to the proposal.

Rival lender ICICI Bank has announced a 35-basis-point reduction in base rate to 9.35%.The private bank has, however, not announced the home loan spreads. If the earlier spreads (base rate + 15 basis points) for women and (base rate +20 bps) for other borrowers continue, the home loans would be available at 9.5 and 9.55%. However, if the bank continues to offer loans at a markup to SBI, as has been its strategy in the past, the spreads may get revised. Both ICICI and HDFC were offering loans at 15 bps above SBI rates.

Besides revising spreads on its home loans, SBI has also made high-value Maxgain loans more expensive.

The Maxgain loan is a home loan structured as an overdraft. In this loan, the borrower is not charged any interest for any surplus that the borrower parks in a current account linked to the loan. For a Maxgain loan above Rs 1 crore, interest has been revised to 9.75% for women and 9.8% for men. In a commercial real estate maxgain loan, the interest has been revised to 9.95% for women and 10% for other borrowers.

Latest Realty News

Oct 04, 2015
MUMBAI: A two-day Real Estate & Infrastructure Investors' Summit on October 5 and 6 will discuss policy initiatives and foreign investment norms, key investment themes prevalent in the real estate sector and India's standing as a global investment destination.
Oct 03, 2015
BHOPAL: Former president of the Bhopal unit of Confederation of Real Estate Developers' Associations of India (CREDAI) and Vyapam scam suspect Vipin Goel recently submitted CCTV footage of his residential premises before the Supreme Court claiming that no cash was seized by the special task force (STF) on the date as shown on record.
Oct 02, 2015
Coimbatore has made it to the top ten tier II cities, with regards to promising real estate hot spots in the country, according to a report by a Gurgaon-based real estate data analytics firm.
Oct 02, 2015
MUMBAI: Redevelopment projects on Brihanmumbai Municipal Corporation's ( BMC) leasehold plots is set to become easier, as Mumbai's civic body has simplified the approval process, and more importantly, has also set a time frame for granting permission for such projects.
Oct 01, 2015
NEW DELHI: Move over property portals. The government is set to launch one of its own, initially with about 50,000 residential properties that you can bid for online. These are properties that debt recovery tribunals (DRTs) have allowed banks to sell through auction after their owners defaulted on loan repayment. The government portal, which is yet to go live, will provide details such as the pictures and floor area of the properties and allow anyone to bid directly after electronically making t
Sep 30, 2015
MUMBAI: Real estate developers have welcomed the RBI's decision to cut repo rate by 50 basis points, but have also appealed to banks to pass on the benefits to consumers by easing the home loan rates. The reduction in the banks' lending rate is also expected to lower the borrowing cost of builders and ease the pressure on interest outgo.
Sep 30, 2015
NEW DELHI: The sharp cut in repo rate is expected to give a fresh lease of life to the struggling real estate sector while lowering of risk weight for affordable housing loans is likely to add to the recovery.
Sep 29, 2015
The Reserve Bank of India (RBI) cut its policy interest rate to a 4-1/2 year low of 6.75 percent on Tuesday, in a bigger-than-expected move that, with inflation running at record lows, could help an economy in danger of slowing down.
Sep 29, 2015
VISAKHAPATNAM: With the demand for flats growing in the Port City, a large number of builders are entering into a joint development agreement with land owners for construction of apartment complexes.
Sep 29, 2015
PANAJI: As the two-year slowdown in the real estate sector continues across the country, Goa's story remains no different and director of Highland Constructions Pvt Ltd Devadas Naik has been forced to shelve his plans of taking the over 20-year-old company public. Rather than rue the lost opportunity, Naik has chosen to diversify his business interests.

Latest Realty News Of State

Realty Talk's