Ahead of festive season, banks cut big-ticket home loan rates

With a view to grabbing bigger share of the big-ticket loan market in large cities, three of the country’s largest lenders — State Bank of India, ICICI Bank and Punjab National Bank — have reduced the rates at which they charge interest on home loans.

State Bank of India on Tuesday upped the ante by reducing the interest rate on home loans above Rs 75,00,000 by 15 basis points to 10.15 per cent.

Having done away with the slab system, the bank will now offer home loans at a uniform interest rate, irrespective of the loan amount. Earlier, it had two slabs — a rate of 10.15 per cent for loans of up to Rs 75,00,000 and a 10.30 per cent rate for those above Rs 75,00,000.

Under the new regime, 10.15 per cent will be the uniform rate for all home loans.

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The discount of five basis points that the bank offered to woman borrowers has been retained.

To avail of this scheme, a woman has to be the sole applicant or the first of the co-applicants; and the sole or the first of the co-owners of a property.  

India’s largest private-sector lender, ICICI Bank, too, has lifted the different interest rate slabs on its home loans.

The bank recently started offering loans of up to Rs 5 crore (Rs 50 million)to salaried individuals on a flat interest rate of 10.15 per cent.

This offer is currently for loans availed of till the end of this month but people in the know say it is likely to be extended.  

Earlier, under a special scheme started in May this year, the lender had reduced the rates by up to 10 basis points (bps) on home loans of up to Rs 75 lakh.

Under this scheme, the interest rate charged was 10.15 per cent, or 15 bps over the base rate for salaried individual.

For the same amount, self-employed individuals were being charged 10.25 per cent. For loans above Rs 75,00,000, the bank was charging interest at the rate of 10.50-11.25 per cent.

State Bank Of india wants to enhance its customer base with the new reduced home loan rates. Photograph: Anindito Mukherjee/Reuters

Punjab National Bank, the third top bank to have slashed its rate, is now offering home loans of up to Rs 2 crore (Rs 20 million) at 10.25 per cent.

For those above Rs 2 crore, customers are to be charged 10.50 per cent. Earlier, the bank charged 10.25 per cent interest for loans of up to Rs 75,00,000 and 10.50 per cent for the loans above that amount.  

A senior SBI executive said the bank had revised its rate and structure because of growing competition, as some lenders were offering lower rates on loans of Rs 75,00,000 and above.

“We want to increase market share in loans of higher amounts. There is a huge market for such borrowings in large cities. At present, SBI leads the market in the sub-Rs 30 lakh loan category,” the official added.  

With a change in sentiment, there were expectations of a pick-up in loan growth during the festive season, which kicks off from Ganesh Chaturthi and lasts until the end of December, he said.  

Competitors like home financing firm HDFC charges between 10.15 per cent and 10.65 per cent for salaried and self-employed professionals.

These rates, charged irrespective of the loan amount, were offered under a monsoon bonanza scheme and were to end on August 31.

But now, the same rates are likely to be converted into a festive-season offer.