MUMBAI: A week after the State Bank of India slashed interest rates, private lender ICICI Bank followed suit on Monday, knocking off 30 basis points for home loans up to Rs 30 lakh.
The interest rate would now be 8.3 per cent for salaried women and 8.4 per cent for others. By evening, HDFC also slashed interest rates on home loans up to `30 lakh to 8.35 per cent for women and 8.40 per cent for others.
Both ICICI and SBI said the move was to support the government’s ‘Housing for all by 2022,’ programme. “There’s a requirement of 20 lakh affordable homes. It is expected that every year, at least 40 lakh units will enter the market from 2018,” said Praveen Jain, president, National Real Estate Development Council.
In 2016, housing sales and new project launches dipped by 18-22 per cent. But affordable housing is picking up. According to PropTiger, the segment accounted for 54 per cent of cumulative sales in top nine cities between October and December.
“Customers of economically weaker sections and low-income groups can avail the dual benefit of low interest rates from us and credit-linked subsidy under the Pradhan Mantri Awas Yojana,” said Chanda Kochhar, MD, ICICI Bank.
Last week, SBI MD Rajnish Kumar said customers were undecided on buying homes as interest rates and prices have been high for too long.
Currently, 76 housing finance companies and banks offer finance, and rates have eased over 100 bps in the last one year to 8.35 per cent — a six-year low. A 25-30 bps reduction in interest rates would reduce monthly EMIs by roughly `550. But whether this move will revive demand remains to be seen.
For banks, this segment is low-risk with fewer NPAs and hence attractive. For builders, the ‘infrastructure status’ given to affordable housing would likely lower their construction costs. With the landmark RERA Act of 2016 also being passed, 2017 is poised to be a watershed year for India’s residential market, say experts.