SBI’s move points to a home loan rate slide | india | Hindustan Times
Today in New Delhi, India
Dec 10, 2016-Saturday
New Delhi
  • Humidity
  • Wind

SBI’s move points to a home loan rate slide

india Updated: Feb 01, 2009 21:41 IST
Sandeep Singh
Sandeep Singh
Hindustan Times
Highlight Story

Taking a leaf out of what ABN Amro Bank did in 2004 when it offered a special lower rate of 6.25 per cent for the first two years on new home loans, the State Bank of India has announced a special rate of 8 per cent for the first year on loans taken by April 30 this year.

Is this a publicity stunt?

Many in the industry seem to think so notably rivals. SBI’s gambit is like a limited price war. Some experts think property prices need to fall, and cheaper money may not revive the realty market so easily.

"This is just an marketing gimmick and they are offering it only for the first year and from the second year they can go back to whatever rate they want to," said a senior official at a leading home loan provider.

"It is not a genuine 8 per cent and is a loaded scheme as it is only for the first year," said the head of assets at a private sector bank. "However, it will give low interest benefit to the customers for one year."

"It gives an indication of which way the rates move over the next one year and that is downwards," said the head of assets of a private sector bank.

SBI termed the step as a passing on of government concessions to the customers, saying it would fan more demand, while admitting it would attract customers.

"The one-year window has been given to attract a large number of customers and it gives them the assurance that for the one year we are not going to raise the interest rates," said Suresh Chandra, DGM, Personal Banking, SBI.

Replying to why it was done only for the first year, Chandra said, "It is a floating rate and interest rates keep changing. From the second year onwards, the rate will be as per prevailing market conditions."

While SBI feels that lowering the rates will fan demand for properties others in the industry say that interest cut alone cannot boost the realty market.

"Bringing down the serviceability index alone will not bring in demand and the property prices will have to go down as the impacting factor now is the affordability index," said Kamlesh Rao, head of home loans, Kotak Mahindra Bank.