Mumbai: Upping the ante against banking leader State Bank of India (SBI), Housing Development Finance Corp (HDFC), the home finance major in the country, has decided to give loans at a fixed rate of 8.25% per annum. HDFC’s new offer will be for all new loans taken before April 1, 2010, and the 8.25% rate of interest will remain fixed till March 2012. Thereafter, depending upon the loan amount, the customer will move to a floating rate structure, applicable on April 1, 2012. NRIs and PIOs can also get loans at this reduced rate, an HDFC release said. Over the last few months, SBI had been offering home loans at as low as 8% fixed for the first year and subsequently moving to a higher rate. Compared to HDFC’s 8.25% offer, SBI offers home loans of up to Rs 30 lakh at 8% for the first year, 8.5% for second year and from third year onward it moves to a floating rate, the bank said. The hugely advertised 8% rate from SBI had generated substantial interest among home buyers since it was launched. According to industry estimates, for a 20-year loan of Rs 30 lakh and considering present rate structure is valid when customers move from fixed to a floating rate, the effective interest rate for the tenure of the SBI loan will be 9.24% per annum compared to 8.63% in HDFC. In the Rs 30 lakh to Rs 50 lakh bracket, the effective rates work out to 9.24% for SBI and 8.81% for HDFC. And for loans of Rs 50 lakh and above, effective rate for SBI will be 9.5% compared to 9% for HDFC. A lower rate leads to savings on the part of the customer. The new rate from HDFC is part of its festival offer, usually offered during the December-March period in every financial year. The main reason for offering a lower rate is HDFC’s ability to bring down its costs of funds, due to the availability of ample liquidity in the system, said Renu Sud Karnad, joint MD, HDFC. “The banking system continues to park around Rs 1 lakh crore with RBI through reverse repo. We have been able to bring down our costs due to improved operational efficiency and good quality portfolio,’’ Sud Karnad said. “This will reduce the cost for home buyers,’’ she added. All home loan customers who apply and take a part-disbursement before March 31, 2010, will get this rate. The rate is fixed for loans of all amount but after March 2012, prevailing rates as per the amount of the loan will be applicable to the home buyers, an HDFC release said. At present, HDFC has three slabs: loans up to Rs 30 lakh, above Rs 30 lakh to below Rs 50 lakh and Rs 50 lakh and above.
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