The State Bank of India (SBI) has cut rates on home loans of up to Rs30 lakh by 25 basis points for new borrowers, as it seeks to capitalise on the demand generated by the central government efforts to spur affordable housing.
The rate was reduced to 8.35% from 8.60% — the second time in 2017 that India’s largest lender has slashed home loan rates after an effective 50 basis point cut that led other lenders to follow suit, Live Mint reported.
It may be noted one basis point is 100th of a percentage point.
In the two years to March 2017, credit to industry has grown 0.76%. In comparison, personal loans grew 39% and mortgages rose 36%, data from the RBI shows.
For loans ranging from Rs30 lakh to Rs75 lakh, the bank has cut rates by 10 basis points.
India’s banks are focusing on affordable housing to take advantage of incentives offered by the government to home buyers and to counter the absence of demand for credit from other sectors of the economy.
Prime Minister Narendra Modi-led government’s Housing for All initiative envisages every Indian family owning a house by 2022, the 75th anniversary of the country’s independence.
In the two years to March 2017, credit to industry has grown 0.76%. In comparison, personal loans grew 39% and mortgages rose 36%, data from the Reserve Bank of India shows.
“Banks will look at the housing space extensively since corporate lending has slowed down,” said Siddharth Purohit, senior banking analyst, Angel Broking Ltd. “There is enough space for both non-banking financial companies (NBFCs) and banks to grow. Interest subsidy scheme will be the motivating factor for new home buyers.”
An SBI statement announcing Monday’s rate cut also said that eligible home loan customers can avail of an interest subsidy of Rs2.67 lakh under the Pradhan Mantri Awas Yojana scheme. It also said that it had come out with special offerings for construction finance to builders of affordable homes.
Last month, the SBI tied up with the Confederation of Real Estate Developers’ Associations of India to offer concessional loans for affordable housing projects after the association launched 375 affordable housing projects across India.
According to the 2011 Census, India has a housing shortage of 62.5 million units. In the budget this year, the government gave infrastructure status to affordable housing in order to encourage investment and enhance funding access.