The Hindu Business Line : Banks to focus on home loans below Rs 25 lakh

Hyderabad, Nov. 20 If you are planning to buy your dream house here is good news. Banks, which have been going slow on home loans till recently, are now planning to focus more on home loans below Rs 25 lakh.

The bankers are also expecting an increase in demand for home loans, especially in the small ticket segment, and are taking steps to woo the customers with speedy procedures and attractive offers.

“There is a 75 basis point reduction in the interest rates on home loans. This will drive demand,” Mr R.S. Reddy, Chairman and Managing Director, Andhra Bank, told Business Line.

The bank would focus more on home loans between Rs 10 lakh and 15 lakh as it would “definitely help profitability,” he added.

According to Ms Renu Challu, Managing Director, State Bank of Hyderabad, the recent reduction of capital requirement for home loans by the RBI would also facilitate aggressive lending by banks.

“Definitely, there will be a big push. SBH will also push home loans below Rs 20 lakh and 25 lakh aggressively. It is a priority sector for us,” she said.

Many other banks have also identified housing loans as a priority.

‘Prices must come down’

“To regain the momentum, there should be a little effort from the builders’ lobby as well. They had taken the prices to unaffordable levels which should be brought down,” Mr Reddy said.

There is a talk of some builders offering special discounts and bringing down the prices to push the demand up, he added.

The builders, on their part, are happy with renewed interest of banks in housing loans. “The coming down of home loan rates will be beneficial for the end-users in buying properties at a better price. The developers will also be benefited as it will reduce lending cost,” said a spokesperson of real estate major DLF.

“DLF has increased its focus on mid-income housing and is already working on thin margins of 35 per cent which rules out price reductions. However, our offerings targeting mid-income groups are going to be well within the reach of consumers,” he added.

According to RBI data, the loan growth in the housing sector decelerated slightly in the second quarter of the current fiscal year. They grew at about 14 per cent (Rs 32,792 crore) up to August 31, 2008 compared with Rs 34,333 crore in the year-ago period.