State Bank of India on Monday announced a cut in interest rate on new home loans ‘in the affordable housing segment’ by up to 25 basis points, making equated monthly instalments cheaper by up to ₹18 per lakh. This move is expected to exert pressure on other lenders to follow suit.

India’s largest bank reduced interest rate on home loans up to ₹30 lakh from 8.60 per cent to 8.35 per cent. On home loans over ₹30 lakh and up to ₹75 lakh, the bank pared interest rate from 8.60 per cent to 8.50 per cent.

The new home loan rates are effective May 9 and part of a limited period offer up to July 31.

Ample liquidity coupled with robust demand for home loans seems to have prompted the bank to go for the rate cut.

Home loans rates above ₹75 lakh remain unchanged at 8.65 per cent for women borrowers and 8.70 per cent for others.

The bank, in a statement, said the effective interest rate for all eligible salaried customers will be 8.35 per centfor loans up to ₹30 lakh. Besides, an eligible customer can also get an interest subsidy of ₹2.67 lakh under the Pradhan Mantri Awas Yojana scheme.

Rajnish Kumar, Managing Director,SBI, said, “We have seen a steep hike in the home loan enquiries recently and reduction in rates will further help millions of buyers fulfil their dream of owning a home.”

MG Vaijinath, Chief General Manager, observed that in view of the government coming out with lot of initiatives to help those who want to buy a home (for the first time), the bank also wants to supplement these efforts.

A borrower will now save ₹540 per month on a ₹30 lakh home loan and in a year the saving will amount to ₹6,360.

“Over a loan period of, say 30 years, the borrower will save almost ₹2 lakh. Suppose, this saving is invested in recurring deposit, it will grow to about ₹6.50 lakh over this period,” he explained.

Special offer for builders The bank has ‘come out’ with a special offer for builders executing affordable housing projects.

The bank will give builders, based on their rating, up to 35 basis points interest rate concession, he added.