Indian Banks Reduce Home Loan Rate to Boost Real Estate Sector

by Sanjay Jha | December 15, 2008 at 02:11 am

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Government run Banks in India have cut down the interest rate to boost the sagging housing sector. In the aftermath of global recession reas estate sector has been badly affected and sector growth has gone in negative. Developers have been asking for government sops to bail out from current crisis.

Apart from announcing an economic stimulus package Indian government has been asking realtors to reduce the prices and also instructed banks to reduce the interest rate on housing loans. The banks have also decided to cut the lending rates for the micro and medium enterprises by 100 basis points.

In a move which would come as a relief to borrowers, the IBA has decided to freeze the interest rate for the first five years, meaning that his EMIs won’t fluctuate. After the freeze period, the borrowers will have the option of choosing between floating or fixed rate of interest.

The new package has also done away with the processing fee and pre payment charge on loans upto Rs five lakhs. A free insurance will also be provided to the borrowers, the premium of which will be borne by the bank.

The IBA has also announced a margin of 10 percent for loans upto Rs five lakh and 15 percent for loans between Rs 5-20 lakh. It means that a borrower will have to pay 10 or 15 percent of the purchase value upfront, as per the loan amount.

The new home loan rates will be valid till June 30, 2009.

The new package also assures the borrowers in case the lender bank comes up with a home loan product of lesser value. In such a scenario, the bank will match the older package with the lower one.

The package is aimed at boosting growth, and will be available only for new home purchases and not for refinancing existing borrowers.

The special package will only be offered by state-run banks.

1 million=10 Lakh