ICICI cuts home loan rates, others to follow

Post cut, the loans with tenure of 1-5 years for Indians and NRIs, were brought down from 11.75 per cent to 11.25 per cent, it said. An interest of 12.25 has been fixed for loans to NRIs with 6-7 years repayment tenure, it added. Internationally, home loans of 30-year tenure are widespread and the preferred option for the common man. “This increase in tenure would offer customers greater choice and would also make the loan more affordable,” ICICI said.

Industry sources say that HDFC will follow ICICI’s example and cut its rates accordingly. Due to intense competition among the housing finance companies, both HDFC and ICICI were waiting for the other to cut interest rates after the Reserve Bank of India (RBI) announced a one per cent cut in bank rate.

Though HDFC has cut its interest rates on deposits by 50 to 100 basis, it has failed to take any step in cutting its lending rates. However, HDFC has a floating rate loan at 12.75 per cent which ICICI has failed to emulate till date. While home loans are also offered by other financial institutions and public sector banks, its ICICI and HDFC which setting industry standards and customer services. Among the public sector banks, Corporation Bank is expected to reduce the interest rate to be in line with the industry norms, bank officials said.

Meanwhile, chief of ICICI business mortgages Atul Jog said in Calcutta today that since the home loan schemes was launched in Mumbai last year, ICICI had disbursed more than Rs 175 crore among 8,200 odd customers in as many as 12 Indian cities and towns helping the people realise their long cherished dream of having a house.

He clarified that the steady emergence of a middle to higher income group all over the country had encouraged them to introduce the scheme both in the big cities and small towns. Jog said largely because of non-availability of similar projects in lesser known areas, response from the customers in these areas was overwhelming. “We are also expecting a similar response from calcutta and other eastern regional cities and towns in the coming months,” Jog asserted.

To a query about the quantum of success they had so far enjoyed in the particular scheme elsewhere, Jog said on the basis of their resounding success in smaller cities like Aurangabad, Nasik, Nagpur, Vijaywada and Vizag, apart from those in Mumbai, Chennai and Bangalore, this year’s allocation for the home loan scheme had been increased from Rs 375 crore (1999-2000) to over Rs 900 crore. “Similarly by this year end we propose to introduce the scheme in at least 15 more centres in different regions,” Jog pointed out.

About the rate of interest under the scheme which also for the first time in the country had been extended up to 30 years, Jog said it varied between 11.25 per cent and 12.85 per cent. Though the amount of loan varied between two lakhs and Rs one crore, most of the loans sanctioned so far ranged between Rs four and six lakhs, Jog asserted.