How are Home Loan Interest Rates Determined

 Borrowers should possess a thorough knowledge of the key factors influencing home loan interest rates in India before applying for this credit option.

Thanks to the easy availability of home loans, people can now fulfil their dreams of owning a home. Furthermore, the high-value loan amount and the competitive home loan interest rates have made this credit facility popular among homebuyers in India.

The monthly instalments and borrowing costs are significantly impacted by interest rates. Therefore, borrowers should possess a thorough knowledge of the key factors influencing home loan interest rates in India before applying for this credit option.

How Do Financial Institutions Determine the Home Loan Interest Rates

Lending institutions consider the following factors while determining the home loan interest rates for a particular borrower:

Location of the property

The property’s location also impacts the interest rates on a home loan. If a property is located in a posh location with amenities, such as railway stations, grocery shops, hospitals, schools, etc., in proximity, it will have a high resale value.

Consequently, financial institutions will charge a lower interest rate for such properties. On the other hand, choosing a property in an area with poor facilities will result in a higher interest rate.

Income stability of a borrower

The interest rates charged by any financial institution depend heavily on a borrower’s income status. Lenders favour borrowers with a stable source of income. Therefore, salaried people are given lower interest rates because their steady income indicates the ability to pay back loans on time.

Loan quantum

Borrowers should give equal weightage to loan principal. High loan amount will increase home loan EMI burden for a borrower, thus increasing the risks of credit defaults. Hence, financial institution charges a higher interest rate for a greater loan amount.

Borrowers must make sure to pay a sizable down payment if they require a sizable loan principal. A sizable down payment will lower the loan balance, resulting in a lower home loan interest rate.

SBI all loan's EMI set to rise as lender hikes interest rates

State Bank of India (SBI) has raised the marginal cost of funds-based lending rate (MCLR) by 15 basis points across tenors, making most consumer loans costlier for borrowers. The benchmark one-year MCLR, which is used as base for fixing most of home loans, auto and personal loans, has been raised by 10 basis points (bps) to 8.05 percent, as against 7.95 percent earlier. Why are loans impacted by RBI's decision? Generally, when RBI hikes the repo rate, it increases the cost of funds for banks. This means that banks will have to pay more for the money they borrow from RBI. Consequently, banks pass on the cost to borrowers by increasing their loan interest rates, making EMIs costlier. As a result, both new and existing borrowers witness an increase in their loan interest rates.

SBI Offers Discounts On Interest Rate on Home Loans For Festive Season 2022

 SBI is offering a concession of 20 basis points to borrowers with CIBIL scores of 700-749, which is almost 8.55 per cent, instead of the normal 8.75 per cent.

State Bank of India (SBI)’s festive offers are here! Since the festive month is approaching, the biggest lender in India is also in a jolly mood and is offering concession of 15 basis points to 30 basis points on its sbi home loans. While the offer is seemingly lucrative for many buyers, it is only available from October 4, 2022 to January 31, 2023.

While the normal interest rates on SBI home loans range from 8.55 per cent to 9.05 per cent, under the lender’s festive offers, these rates are expected to be lower and must be checked from the bank itself. In addition to this, SBI is also offering zero processing fees on its regular and top-up home loan plans. But, in order to reap benefits of these offers, a person’s CIBIL score will matter.

SBI Top-Up Home Loan Rates

For this festive season, SBI is offering 1.5 basis points concession on credit scores between 700 to greater or equal to 800, as per Livemint.com. For borrowers with credit score greater or equal to 800, the interest rate is around 8.80 per cent, instead of the normal 8.9 per cent.

For credit scores less than 1 to 699, the interest rates are unchanged, similar to the case of regular home loan rates.

HDFC hikes lending rate by 50 bps; EMIs to go up

 Leading housing finance provider HDFC Ltd. upped its lending rate by 50 basis points on Friday after the Reserve Bank of India (RBI) hiked the policy repo rate by 50 basis points (bps) to 5.9% in its Monetary Policy Committee (MPC) held on Friday. In the last five months, HDFC has implemented a total of seven rate hikes.

"HDFC increases its Retail Prime Lending Rate (RPLR) on Housing loans, on which its Adjustable Rate Home Loans (ARHL) are benchmarked, by 50 basis points, with effect from October 1, 2022," the company said in a statement.

The interest rates on home loans are available from HDFC Limited starting at 8.10% p.a. This interest rate is applicable to loans for purchasing a new house, balance transfers, home renovations, and home expansions. The above-mentioned home loan interest rates are flexible during the loan's term and are determined by HDFC's benchmark Rate ("RPLR"). Both new and existing borrowers will now be required to make EMI payments that are 0.50% higher due to the corporation raising its key lending rate.

On September 30, the Reserve Bank of India (RBI) announced a 50 basis point increase in the repo rate, the fourth such increase since May. The cost of funds for banks and financial institutions would be increased soon as a result of the repo rate, and more banks and financial institutions are anticipated to follow. Meanwhile, as a result of the increase in the repo rate, both current and new loan borrowers would be required to make higher equivalent monthly installments (EMIs) for their car and home loans because it will now cost banks and lending companies higher to borrow funds.

SBI Home Loan की ईएमआई में आज से हो जाएगा बदलाव, आपकी जेब पर कितना पड़ेगा असर

 SBI has not yet revised the minimum interest rate on home loans in September. Effective August 15, 2022, the bank’s EBLR is 8.05%+CRP+BSP, as per the SBI website. RLLR is 7.65%+CRP.

However, depending on the credit score, a risk premium will be charged. This means a borrower with a credit score of more than 800 will now pay a minimum rate of 7.55 percent under the regular home loans.

For applicants who have a credit score of 800 or higher, the minimum interest rate on regular home loans is 8.05 percent. The risk premium in this case is 0. The risk premium is based on the CIBIL score; the risk premium rate increases with a lower credit score.

A credit score of 750 to 799 will result in a 8.15 percent interest rate with a risk premium of 10 basis points. Female borrowers will receive a 0.05 percent interest rate reduction.

Borrowers will be compelled to pay higher interest rates, i.e. higher EMIs, once the reset date arrives, or their loan tenure would be extended if there is room for it.

SBI Benchmark Prime Lending Rate BPLR

The banks Benchmark Prime Lending Rate (BPLR) was hiked to 13.45% p.a. w.e.f. 15.09.2022.

Top Mortgage Lender, HDFC, Sees Home Loan Demand Despite Rate Hikes

 Demand for home loans is strong in India and is expected to pick up further over the next few months, the head of major housing finance firm Housing.

Home loans have grown by 16% as of end July compared to same period last year.

"The economy is buoyant, the feel good factor is high, affordability is better so people are comfortable buying houses even if rates are slightly higher," Keki Mistry, chief executive of HDFC, told Reuters.

The central bank has already raised rates three times by a total of 140 basis points in this financial year to tame stubbornly high inflation, which has remained above the central bank's tolerance band for several months.

Lenders have passed on the interest rate rises but Mistry said that there are no signs of stress among home buyers and collections on loan dues remain robust.

Interest rates are expected to rise further with economists expecting at least another 60 basis points by March 2023, according to a Reuters poll.

"The economy feel good factor is so strong that (we) expect that festival season will be very strong," Mistry said, referring to the September to December period.

"I don't think we will see too much of a rise in interest rate going ahead, some increase will be there but don't think that will deter the buyers," he said.

Economists concur, with Madan Sabnavis, chief economist of Bank of Baroda saying in a report late last month that home buyers would be prepared for fluctuating home loan rates.

Housing loans have grown by 16% as of end July compared to same period last year, according to the latest central bank data.

Demand is likely to be particularly strong from India's larger cities, where sales had slowed between 2016-2020 but where a revival is now visible, said Mistry.

HDFC disburses Rs 2,800-cr low-cost loans under Central scheme

Mortgage major HDFC has disbursed Rs 2,800 crore loans to 14,290 home-buyers under the Pradhan Mantri Awas Yojna (Urban) so far, which entails a Central subsidy of Rs 302 crore.

The Modi government had launched the housing for all by 2022 in June 2015 and the disbursement is from that period.

While the lender has provided home loans worth Rs 1,728 crore under PMAW's credit-linked subsidy scheme (CLSS) to the economically weaker section (EWS) customers and low- income group (LIG), it has disbursed loans worth Rs 1,067 crore to 3,526 customers from the middle income group (MIG), it said in report today.

The EWS comprises people with an annual household income up to Rs 3 lakh, while LIG include those with income greater that Rs 3 lakh and up to Rs 6 lakh.

Government launched its flagship PMAY(U) scheme on June 25, 2015 to provide housing for all by 2022. Since then, it has taken several steps such as inclusion of the MIG category under CLSS, increasing the loan tenure to 20 years, extending the MIG scheme till March 2019, increasing in the carpet area of houses under the CLSS for MIG, etc, to increase the scope of PMAY.

It also announced in the Budget 2018 that about 31 lakh homes are to be built in urban areas in FY19, and 51 lakh in rural areas.

"This has renewed the interest of homebuyers in the real estate sector and allowed first-time home-buyers to avail more benefits to own a house," said Renu Sud Karnad, managing director at HDFC.

HDFC ltd home loan had disbursed 39 per cent of home loans in volume terms and 20 per cent in value terms to customers from the EWS and LIG segment during the nine months to December 2017, said the report.

The lender on an average has been approving 8,000 loans on a monthly basis to the EWS and LIG segments, with monthly average approvals at about Rs 1,300 crore, it added.

In value terms, home loans to the EWS and LIG segments grew 32 per cent and 39 per cent, respectively, during the April-December 2017 period.

The average home loan to the EWS and LIG segment stood at Rs 10.24 lakh and Rs 17.38 lakh, respectively.

Till date 4,452 towns have been notified as statutory towns under the housing for all mission and properties located in these towns are eligible for subsidy, according to the report.

Magicbricks & SBI to launch Big Bang Home Carnival 2018

India's No.1 Home Loan Bank & MAGICBRICKS jointly comes up with Big Bang Home Carnival. 62 developers have come on board to showcase 97 projects while SBI is offering a host of loan deals in SBI and RERA Approved Projects.

The housing festival will showcase nearly 16,000 units, across 22 Indian cities and will culminate on March 9. 62 developers have come on board to showcase 97 projects while SBI is offering a host of loan deals in SBI and RERA Approved Projects.

Get more details on SBI Home Loans

State Bank of India offering home loans at Zero processing Fee with an attractive interest rates and additional 20% loan for the young generation having age upto 45 years. The customers can get home loans pre-approved even before they decide the property to be purchased. To improve customer home loan journey SBI offer fast processing and door step document collection facilities.

Under the Big Bang Home Carnival, many developers are also offering a host of exciting deals to customers ranging from international holidays, free car parking and club membership, cash discount up to Rs.350 per sqft, GST free registration, free modular kitchen and etc. Besides, SBI is also offering pre-approved home loans, flexi home loan (with 20% additional loan) and zero processing fees in SBI approved properties.

Shimla’s First Snowfall of the Year Will Take Your Breath Away

Residents and travellers alike were amazed by the beauty of the blanket of snow, which cloaked the town in a picturesque vision of beauty. As news spread, people gathered to enjoy the first snowfall of the year. Here are some photographs shared on Instagram, capturing visions of Shimla’s snowcapped mountains and valleys!

The tourist season in Shimla (taxi for shimla from delhi) and some other places, which got a boost after the first snowfall of the year last week, providing little relief to the hotel industry, lasted for just four days.

The occupancy in hotels again witnessed a slump today as the week-end tourism boom ended and the occupancy dropped by 70 to 80 per cent. The hotel industry is now pinning hopes on the predictions of rain and snow in mid and high hills on January 29 and 30.

“With Shimla witnessing the moderate snowfall on January 23 and Republic Day on Friday, extending the weekend, there was a heavy footfall of tourists and hotels were packed to their capacity,” said president, Tourism Industry Stakeholders Association, Shimla, MK Seth, adding that, “We are hoping that the predictions of the Meteorological Department will come true and the tourist rush will increase again.”

However, locals had a harrowing time commuting in and around the city as roads were chocked due to heavy vehicular rush. Long queues were seen near Kufri on the suburbs of Shimla while major parkings that have come up on the Cart Road again proved to be major traffic bottlenecks.

The worst hit were the people crossing the lift as multiple parkings have come up in the vicinity and crossing the stretch is nothing less than a nightmare. Planners did not visualise the peril of having single entry and exit route at the parkings and vehicles waiting for entry into the parking led to a long queue of vehicles, causing traffic jams.

RERA, GST pull home loan growth down 32.7% YoY in Apr-Oct ’17

Low buyer's sentiments in the real estate sector despite a dip in the home loan interest rates has led a sharp decline in home loan growth.

According to the Centre for Monitoring Indian Economy (CMIE), home loan growth in April-October fell down by 32.7 percent from a year ago, one of the biggest declines in the last five years. In 2016, home loan growth was down 4.27 percent, while in 2015, it was up 26.89 percent.

Over the past two years, the interest rate on home loans has come down by 150-200 basis points, said the report. A basis point is one-hundredth of a percentage point.

Major financial institutions have lowered their interest rates. In early November, the State Bank of India announced its plans to offer the cheapest home loans by implementing a five-basis point reduction in margin cost based lending rate (MCLR rates). The country’s largest lender bought down the rate to 8.30 percent.

Many developers believe that weak consumer sentiment stems from the impact of three major events or reforms made by the government to either improve India's economic growth, fight black money and or simplify tax.

Narendra Modi government gives big home loan boost to housing in India; demand set to soar

Cheaper loans should boost demand and help revive real estate sector; apply to slightly bigger homes as well.

The government on Thursday made loans cheaper even for slightly bigger homes bought by middle-income groups in a move that should boost demand and help kick-start the real estate sector. The pace of home purchases has tapered off sharply for several reasons; while buyers have been waiting for prices to come off, the roll-out of rules under Real Estate Regulatory Authority (RERA) in July has held back new launches. Demonetisation too is believed to have hurt home sales; the inventory of unsold apartments across India is estimated at close to Rs 6 lakh at the end of September. Keki Mistry, vice-chairman, HDFC, noted the lower interest for larger homes should spur purchases. However, the caveat that those already owning a property would not be eligible to a lower interest, Mistry felt, should be done away with as there were several buyers wanting a second home. The Cabinet on Thursday approved a proposal that will allow those with an annual income of up to Rs 12 lakh to buy or build a house of up to 1,200 sq ft; earlier the area was capped at 900 sq ft. Those with an annual income of up to Rs 18 lakh are now eligible for loans at a softer rate to buy or build a home covering 1,500 sq ft; this was 1,100 sq ft earlier. Purchases in the secondary market are also covered by the scheme.

PK Gupta, managing director, State Bank of India, said the new rules would encourage more purchases at a time when buying had slowed somewhat. Gagan Banga, vice-chairman and MD, Indiabulls Housing Finance, said given how buyers preferred slightly larger homes in the Tier-II and Tier-III cities, several potential buyers had not been able to take advantage of the soft loans. “We expect many of them will not use the opportunity to buy homes now,” Banga said, adding sales could see a spurt in cities such as Pune, Chandigarh, Ludhiana and some pockets in south India. Crisil Research wrote recently that demand for residential property was unlikely to revive in the next 12-18 months.

“Though capital values have been under pressure over the past few quarters, a significant chunk of supply in many micro markets remain unaffordable,” analysts at the ratings agency observed. The total outstandings of mortgages with banks at the end of September was 12.8% higher than those in September 16. This was slower than the increase in outstandings between September 2015 and September 2016, when they had grown 18%. Since demonetisation the pace moderated to a monthly average of 15%. That’s despite an effective asset price correction of around 5-10% in H12017. However, housing finance companies have, over the past year, disbursed at a fairly fast pace.

Earlier this year, the government had allowed buyers with an annual incomes of between Rs 6 lakh and Rs 18 lakh to borrow at concessional interest rates. Approximately 3.5 lakh homes of the registered 6.7 lakh apartments in Mumbai Metropolitan Region have not found buyers so far, according to data on the MahaRERA website. Experts say developers are looking for more affordable locations to make homes affordable. “Developers are building smaller apartments because compact two-bedroom homes are selling faster at the moment. The interest subsidy for slightly bigger homes will help clear off inventory from older projects,” said Rohit Gera, MD, Gera Developments.

Demonetisation: Actual home buyers benefit; developers roll out attractive rates and payment plans

The real estate sector, known as a safe haven for parking black money, was hit hard by demonetisation. The sector which was already going through as tough phase saw sales go down by 32 per cent during the October-December 2016 quarter compared to previous quarter as per Anarock Property Consultants. Apart from this there was a drop of around 60 per cent in new launch supply in the quarter.

Demonetisation along with other reforms-- Real Estate Regulatory Act(RERA) and Goods and Services Tax (GST)-- disrupted the real estate market at least in the short-term.

However, these reforms have turned out to be a blessing in disguise for the actual home buyers as the prices have remained almost stagnant or dipped a bit across major cities. "While a few cities such as MMR, NCR and Chennai have witnessed minor corrections in price, other cities - namely Bangalore, Pune, Hyderabad and Kolkata - have shown a small upward movement," says Anuj Puri, Chairman, Anarock Property Consultants. Now the developers are more focused towards clearing their existing inventory rather than launching new projects. This is ensuring that the home buyers who were waiting for the possession of their house are actually getting it and more ready-to-move-in projects will be available in the market. "The subdued demand and huge unsold inventory have led developers to maintain competitive prices to offload their existing inventory faster and complete their ongoing projects sooner," he added.

"Owing to the ongoing transformation, developers have also been offering attractive rates and payment plans to draw potential buyers. It is a great opportunity to book homes and cash in on the deals offered by developers," says Surendra Hiranandani, CMD, House of Hiranandani. Apart from this, the influx of liquidity with the banks due to demonetisation has also led to a drop in interest rates which has brought down home loans interest rates at almost a decade low. Now majority of the banks are offering home loan in the range of 8.35 to 8.5 per cent. Lower interest rates means lower EMI and thus increases the budget of the home buyers.

Also, the cash component or black money component has gone down after demonetisation claims experts which will be a big positive for actual home buyers as this will curtail the prices from going unreasonably high as we had seen during the previous boom.

"The funneling of unaccounted monies into the real estate sector has become virtually impossible because of the demonetisation move, which means that future growth in the sector will be based on much sounder and more sustainable fundamentals than ever before," says Anuj Puri, Chairman, Anarock Property Consultants. Also, the reduction of cash component will help homebuyers buy their dream house which was earlier difficult -- they couldn't buy due to the cash component despite the fact that they were capable of getting home loan and paying EMIs.

"In fact all property purchases today already take place on the basis of transparent cheque payments and legal online payment gateways in the post-RERA era. Real estate transactions happening on the basis of cash, or with any significant cash component, are inevitably going to be questioned by the authorities. Nobody wants their property investment to fall under scrutiny for untoward practices,"added Puri.

"Demonetisation needs to be seen in the context of a wider program of reforms in India which are significant in terms of the nation's economy, society and real estate sector. While it did result in some short-term pain for the sector there has been no long term negative impact. Demonetisation, coupled with the implementation of the Real Estate Regulator Act and GST reforms has boosted the confidence of investor and added much needed liquidity in the market," said Anshuman Magazine, Chairman, India & South East Asia CBRE.

SBI holds home loan customer meeting

State Bank of India held a home loan customer connect meeting here on Friday to reiterate that the bank was always at their service.

SBI assistant general managers Haritha Purnima (region-I) and Sekhar Rao (home loan sales team) attended.

Retail assets central processing centre (RACPC)-1 AGM Ch. Narayana Rao in the inaugural address thanked the customers for patronising the bank for a long time and emphasised that for fast and quick sanction of home loans, they were working till late hours.

Ms. Purnima clarified the doubts raised by customers. She explained about the home top-up loan and informed about the discounts offered by the bank in documentation and processing charges during the festival season.

Mr. Sekhar said they had formed exclusive sales team consisting of experienced staff for taking the bank products to the doorsteps of customers.

The customers, who attended the meeting, shared their experiences with the bank and made certain suggestions on how to improve their service.

Among others, chief manager (maintenance) K.N.V. Surendra, CM (sanctions) Basheera Begum and other managers Nageswara Rao, Ramana Rao, Sai Prasad and Swati were present.

Taraqi Ki EMI watch & share

Govt plans higher interest subsidy for economically weaker section in Home Loans

In a move to ensure every household has a roof over their heads by 2022, the housing ministry is likely to increase interest subsidy for flats under economically weaker section (EWS) and low income group (LIG).

Sources said that the proposal has been formulated based on the recommendation of an informal group of ministers, which looked into the 'Housing for All' scheme. The fresh proposal would be placed before the Cabinet for its approval.

TOI has learnt that one of the ministers in the group has even suggested that there should be 0% interest for people falling under the category of economically weaker section. He has also suggested that the cost of such flats should not be more than Rs 5 lakh in any urban area so that people across all sections can own a house.

One of the major components of the ambitious Housing for All scheme is to construct at least two crore affordable housing in urban areas. The cost of such flats is estimated to be around Rs 6.5 and Rs 7.5 lakh. There are also provisions including interest subvention scheme in the housing sector that will meet part of the buyers' home loan burden.

Providing two crore affordable housing is likely to involve investment of about Rs 13 lakh crore in the next seven years.

Sources said that Cabinet clearance of the urban component of Housing for All is crucial. "We cannot start work until the proposal is approved by the Cabinet. We are losing crucial time since we have to meet the target by 2022," said a source.

Source: http://timesofindia.indiatimes.com

India recovers from car sales slowdown in next year

As per the recent study conducted by the research firm Deloitte, the slowing down car sales in the Indian market will bounce back again in year 2012, as the car loan interest rates and inflations in the country are expected to decrease in the next year.
In its report – Driving through BRIC markets, Lessons for the Indian market – Deloitte said that a number of poor microeconomic factors have affected the growth of the passenger vehicle segment in recent months including the likes of skyrocketing fuel prices, high auto loan interest rates and restrained growth of real disposable income.
Since the deregulation in year 2010, there has been a jump of 34 percent in the fuel prices in the Indian market. On the other hand, the interest rates on new car loan have surged to 13 -14 percent.
As per a report given by Mr. Kumar Kandaswami, "The current slowdown is not here to stay as the fundamentals of car sales growth namely urbanization and car density are still very attractive."
The report further elaborates, "Car sales have declined, and registering de-growth since July 2011, compared with the previous year and is not expected to recover unless the macroeconomic factors become attractive. In FY 2011-12, car sales are expected to grow by a meager 2-3 per cent against 30 per cent in 2010."

PSU Banks approve credit proposals up to 400 crore

The government has quadrupled the limits on loans that a bank's internal committee can approve, a move that could quicken credit clearance at 26 state-run banks, including the Bank of Baroda and PNB.
The government has directed banks to set up a credit approval committee - comprising chairman, executive directors and three chief general managers who handle credit, finance and risk management functions. This group can approve credit proposals up to 400 crore. Currently, any loan above 100 crore has to be vetted by the management committee of the board, which met once a month, or 20 days.
"The new initiative will help in facilitating credit disbursement at a much faster pace," said KR Kamath, CMD of PNB. "This would take care of a substantial part of the lending business."
The chairman, through a credit approval committee, can now lend up to 400 crore to an individual borrower. Under the old regime, a management committee of the board, which included a RBI nominee and two independent directors appointed by rotation, the bank's chairman and managing director and executive directors, took these decisions.
This limit is applicable on Category 'A' banks with a business of 3 lakh crore, while smaller public sector banks can use the same structure to approve loans up to 250 crore. If a loan under consideration is higher than these limits, it would be taken to the management board.
"The government decision would enable the management to take operational decision and the board could focus on policy matters," said S Ravi, shareholder director at Union Bank.
Over the past few years, the project size has increased many folds and the restriction of 100 crore was seriously affecting the lending business, said one of the person quoted above. "At least 60-70% of the loan size is above 100 crore, which used to be referred to MCB. Now less than 10% cases would be referred to MCB," he added.
"Though a credit approval committee has replaced the board's management committee, the two are significantly different. The MCB has outside members such as RBI nominee and independent directors; the new committee comprises two EDs and chief general managers, who report to the CMD," said another retired chief of a nationalised bank.
SBI, the biggest, already follows such a practice where loans of up to 500 crore are approved by such a committee and loans bigger than this are referred to the board's committee.

Demand of Car loan Increased in Nov 2011

The unyielding attack on interest rates in a bid to rein in runaway prices is elastic results: the demand for vehicle loans has come down. The growth rate of Car loan volumes have almost halved so far in 2011-12 compared to the same period last fiscal,RBI.
While vehicle loans disbursed by banks in April to October 2010 rose by 13%, in the current year the pace has come down to just 7% this fiscal year. Interestingly, apart from the plunging auto sales, another factor for this decline is a rise in cash-down purchases.
Among car and utility vehicle buyers, customers opting for vehicle finance went down from 80-84% to 70-74%, according to Pawan Goenka, president, Mahindra & Mahindra.
“Another trend is people increasing their down payment. The LTV (loan-to-value) ratio came down from 85% to 75%, in some cases 50:50,” he said. The increased cost of finance added up to the overall cost of vehicles, prompting many aspiring car buyers to postpone their purchases.
“There is a decline in demand for vehicles and it impacted car loan as well. Hike in interest rate also is a crucial factor,” said Jairam Sridharan, senior vice president and head of consumer lending, Axis Bank. Auto loans account for 13% of Axis Bank’s retail lending.
RBI has hiked the repo rate 13 times by a cumulative 3.5 percentage points since March.
Maruti still lags, but auto sales rise 7% in November
After four months of decline, domestic car sales in India grew by 7% in November despite market leader Maruti, which controls almost half of the industry volumes, posting a near-20% decline in sales during the month.
Second-placed Hyundai Motor, homegrown Tata Motors, Toyota, General Motors, Ford and Volkswagen all grew handsomely during the month, but industry body Society of Indian Automobile Manufacturers (SIAM) warned that December could see sales drop again and a full revival will only happen in 2012.
“Sales would fall again in December though it would not be as drastic as in the last four months,” said Sugato Sen, director, SIAM. “Sales growth would only happen from January onwards but even then it would not be enough to reach our target of 2-4% for the entire fiscal.”
So far this year, car sales have declined by 3.5% as a mix of high interest rates, fuel prices and runaway inflation have dampened consumer sentiment.
There is however, no hint of a slowdown in two-wheeler sales in the country, which grew by over 25% during the month. The segment that accounts for a lion's share of overall industry volumes, ensured that total automobile sales in the country grew by 22% during the month at 1,489,714 units.

SBI won't make unique home-loan provisioning

With the finance ministry’s economic survey backing State Bank of India’s (SBI) controversial yet popular home loan scheme, bank chairman O P Bhatt said SBI will not have to make any special provisioning for such loans.
SBI home loans, which offer a lower interest rate in the initial years and rate increases in the later years, were termed teaser loans by the Reserve Bank of India (RBI). RBI is not comfortable with banks offering such products and had increased the standard provisioning requirement for such loans by five times, to two per cent in October.
The increase in provisioning would have put a huge burden on SBI, as most of its home loans were disbursed after February 2009, when the scheme was launched. After RBI increased the provisioning requirement, SBI has tweaked the scheme by offering a fixed discount in the initial years, instead of charging a fixed rate. All floating-rate home loans will be linked to the bank’s base rate.
“The economic survey has said it is far better than I ever said it before. They have sort of reinforced and reiterated what we have said and I am glad that it has happened. We did not ask for an exception, we are totally compliant with what the regulator wants,” Bhatt said today.
Bhatt said SBI’s loans cannot be termed as teaser loans, a view supported by the finance ministry, and hence no extra provisioning is required.
“It is not about compliance, it is about clarity on the nature of the product that RBI labelled teaser loans. The government has called it terraced loans. According to the definition by RBI, we do not have a single teaser loan. In our opinion, we will not have to make any special provision,” Bhatt said.
On interest rates, the SBI chairman said interest rates are expected to go up, but not more than 25-50 bps. SBI, which raised its rates last month, is not contemplating a rise in both deposit and lending rates immediately, he said. Bhatt also said the bank was comfortable on liquidity.
“We have three per cent excess SLR currently. We have enough liquidity in SBI, partly because retail deposits grew at a good pace, and partly because we picked up bulk deposits quite early and also because of the response we got on the retail bond issue,” Bhatt said.
On the proposed rights issue, Bhatt said it may happen in the early part of the next financial year.

Why you should go for a fixed home loan rate now

Some analysts indicate that home loan interest rates may rise in the near future. There are indicators to this effect. The high inflation rate of around 10 % could affect the stable macroeconomic and interest rate environment here.
The Reserve Bank of India (RBI) may hike the key interest rates again to cool down the inflation rate in the next credit policy review in the next couple of months. The inflation rate has been rising due to the rising food prices.
The RBI had hiked the key rates in the Annual Credit Policy for 2010-11. It increased the short-term lending and borrowing rates and the portion of banks' deposit with it by 25 basis points each.
The move was aimed at controlling the inflation rate spiral without choking growth. It had hiked the key lending and borrowing rates, as also the mandatory cash reserves banks park with it by 0.25 %.
Hike in rates will raise cost of funds for lenders
The RBI increased the repo and reverse repo, the rates at which it lends to and borrows short-term money from banks, by 25 basis points. It hiked the cash reserve ratio (CRR), the portion of money that commercial banks deposit with the central bank, by an identical percentage.
The move was to draw out Rs 12,500 Cr from the system. The hike in the repo and reverse repo rates, to 5.25 and 3.75 % respectively, will raise the cost of funds for lenders.
At that time, borrowers could breathe easy as there was enough liquidity in the system. The policy actions resulted in the cost of funds going up which was absorbed by the banking system.
Interest rates may increase in coming months
Likewise, the RBI had said that it will continue to monitor macroeconomic conditions, particularly the price situation, closely and take further action as warranted.
The three major factors that could have a bearing on inflation are uncertain monsoons, volatile prices of crude oil in the international markets, demand pressures.
Presently, all these factors are uncertain. The global factors including the euro crisis, volatility in the stock markets, oil prices etc are all causes of concern. The inflation rate hasn't really reversed.
The economic growth is contingent to a large extent on the monsoons. All these micro and macro indicators indicate that the interest rates may again increase in the coming months. Bad monsoon, global cues and spiraling inflation, can push up interest rates.
Realty attractive
Following the global slowdown the property prices went through a correction. Now, as the economy has staged a recovery, the prices too are on an upward trend.
There is more job security and homebuyers are back in the market. Regardless of the interest rate movements, this is a good time for those planning to buy property to make a move. The question is which one to go for—fixed and floating rates.
Fixed rate ideal
Those planning to purchase a house may do well to lock-in their borrowing now. They should go in for a fixed rate loan. As such, there is no concept of fixed rate loans for the entire tenure of the home loan. The interest rate is generally fixed for only two or three years, after which it is subject to revision. Yet, one should lock into a fixed rate loan.