Bankers say 1% interest subvention will increase offtake of housing loans

With the announcement of interest subvention of 1% on all home loans of up to Rs 10 lakh, by the finance minister Pranab Mukherjee dream of owning a house for lower and middle income group can become reality as the interest rate on housing loans are expected to reduce. The interest subvention of 1 per cent on all home loans of up to Rs 10 lakh will be provided with a stipulation that the cost of house should not to exceed Rs 20 lakh. The subvention will be provided only for one year.

In a response to the finance bill, Mukerjee added a condition of Rs 1,000 crore towards this move. According to bankers this decision taken by finance minister will make houses affordable which in turn increase the offtake of housing loans.

A C Mahajan, chairman and managing director, Canara Bank told Financial Chronicle, “With 1 per cent subvention, borrowers stand to benefit as their interest burden will subside. The move will work as catalysts for home loan borrower and help in promoting affordable housing concept. As far as banks are concerned, the interest rate cut will have no effect as government will compensate for whatever loss we will have from charging lower interest rate to customers”.

In a reply to whether the benefit will also be applicable on special home loan schemes announced by Canara Bank sometime ago, Mahajan said, “The benefit will accrue to everybody. The only question is whether it will be applicable for new customer or even for existing customer particularly who availed loans after April 1”.

Earlier few months ago, Canara Bank had announced a special housing loan scheme under which the rate of interest was fixed at 8.25 per cent for the first year and at 9.25 per cent for next four years.

In a reply to the same issue, Renu Sud Karnad, joint managing director, HDFC said, “The move will prove to be beneficial for low and mid- income group. The latest initiative may result in higher housing loan off-take.”

According to the Reserve Bank of India data, housing loan offtake by May 22 has increased by 5 per cent year-on-year basis. Therefore the total home loan offtake for the same period amounts to Rs 13,028 crore.

Albert Tauro, chairman and managing director of Vijaya Bank pointed out, “The government has been promoting affordable housing concept for some time and the latest move will certainly strengthen the segment”.

According to real estate developers the decision is a much needed step.

Rohtas Goel, chairman and managing director of Omaxe stated, “Yes, this is a good move which will help boost the demand for residential units.” Rajeev Talwar, group executive director, DLF expressing similar views said, “This indeed is a welcome step. The surge in demand will boost the housing and construction sectors of the country”.

Bankers say 1% interest subvention will increase offtake of housing loans

With the announcement of interest subvention of 1% on all home loans of up to Rs 10 lakh, by the finance minister Pranab Mukherjee dream of owning a house for lower and middle income group can become reality as the interest rate on housing loans are expected to reduce. The interest subvention of 1 per cent on all home loans of up to Rs 10 lakh will be provided with a stipulation that the cost of house should not to exceed Rs 20 lakh. The subvention will be provided only for one year.

In a response to the finance bill, Mukerjee added a condition of Rs 1,000 crore towards this move. According to bankers this decision taken by finance minister will make houses affordable which in turn increase the offtake of housing loans.

A C Mahajan, chairman and managing director, Canara Bank told Financial Chronicle, “With 1 per cent subvention, borrowers stand to benefit as their interest burden will subside. The move will work as catalysts for home loan borrower and help in promoting affordable housing concept. As far as banks are concerned, the interest rate cut will have no effect as government will compensate for whatever loss we will have from charging lower interest rate to customers”.

In a reply to whether the benefit will also be applicable on special home loan schemes announced by Canara Bank sometime ago, Mahajan said, “The benefit will accrue to everybody. The only question is whether it will be applicable for new customer or even for existing customer particularly who availed loans after April 1”.

Earlier few months ago, Canara Bank had announced a special housing loan scheme under which the rate of interest was fixed at 8.25 per cent for the first year and at 9.25 per cent for next four years.

In a reply to the same issue, Renu Sud Karnad, joint managing director, HDFC said, “The move will prove to be beneficial for low and mid- income group. The latest initiative may result in higher housing loan off-take.”

According to the Reserve Bank of India data, housing loan offtake by May 22 has increased by 5 per cent year-on-year basis. Therefore the total home loan offtake for the same period amounts to Rs 13,028 crore.

Albert Tauro, chairman and managing director of Vijaya Bank pointed out, “The government has been promoting affordable housing concept for some time and the latest move will certainly strengthen the segment”.

According to real estate developers the decision is a much needed step.

Rohtas Goel, chairman and managing director of Omaxe stated, “Yes, this is a good move which will help boost the demand for residential units.” Rajeev Talwar, group executive director, DLF expressing similar views said, “This indeed is a welcome step. The surge in demand will boost the housing and construction sectors of the country”.