Home loan rates in India may drop from January: NHB

According to the National Housing Bank (NHB) Chairman and Managing Director, S. Sridhar, the prevailing high interest regime might witness a decline from January and home loan interest rates are likely to follow the suit.

The recent increase in the CRR and Repo rates by the Reserve Bank of India (RBI) have had an increasing effect on home loan interest rates, which in turn have affected a sharp rise in home loan EMI’s. Currently home loan interest rates are have crossed 11 percent and some private sector lenders are charging as much as 12.5 percent for their floating rate home loans. Mr. Sridhar, opined that these high rates will reduce and are likely to stabilize at around 10 percent in near future. Despite the high interest rates, the disbursal of home loans has been growing steadily.

“In the last fiscal, home loans grew at a healthy pace of 20 per cent. While disbursement by banks grew 14-15 per cent, loans from financial companies grew 24 per cent. This year, too, the trend appears to be similar, but it is too early to form a definitive view,” he added.

Residex, a residential property prices index, which will monitor the residential property prices in Delhi, Calcutta, Mumbai, Bangalore and Bhopal was launched recently by the NHB and 10 more cities are likely to be added to Residex in the next two months. Over the next two years 60 more cities will be added to Residex. This index will be refreshed every 6 months and will give a good idea of the property prices in the country and city-specific realty movement.

NHB has extensive plans to focus on rural housing finance and it had recently picked up a 12.5 per cent stake in Mahindra Rural Housing Finance Ltd, a wholly owned subsidiary of Mahindra and Mahindra Financial Services Ltd, for an undisclosed sum.

NHB is also planning to launch fixed deposit bonds, which will be used to fund the rural housing business. “We are studying the market condition. We will launch fixed deposit products soon. Given our changed focus to facilitate rural housing and growing business in terms of loan refinancing and direct project financing, we have decided to mobilise public money through fixed deposits,” he said.