HDFC launches festive offer; cuts home loan rate to 6.7%

The Housing Development Finance Corporation (HDFC) has joined the festive season home loan interest rate war between lenders by cutting rates by 4560 basis points (bps) for borrowers with credit scores above 800 for loans above ~75 lakh.

The rebate will be available till the end of October. Last week, two public sector lenders, State Bank of India and Bank of Baroda (BOB), also slashed rates by 25-45 bps in an effort to grow their home loan business.

HDFC, the largest housing finance company, said customers can avail of new home loans starting at an interest rate of 6.70 per cent per annum, irrespective of the loan amount or employment category. For the salaried, the relief is 45 bps and 60 bps for the self-employed.

Over the past couple of years, property prices have more or less remained unchanged in major pockets across the country, while income levels have risen. Record low interest rates, subsidies under the Prime Minister Awas Yojana, and tax benefits have also helped, said Renu Sud Karnad, managing director, HDFC.

On the implications of the rate revision,

Samantak Das, chief economist and head of research & REIS, JLL India, said as this reduction is linked to credit scores and holds true irrespective of amount or employment category, the market will be buoyed with cheaper credit available across all categories of residential buyer.

According to the Reserve Bank of India’s data, banks’ home loan book grew by 8.9 per cent year-on-year to ~14.66 trillion till July. HDFC’S assets under management rose to ~5.74 trillion in June, as against ~5.31 trillion a year ago.

The factors driving demand for homes and loans to purchase them include improved affordability because of increasing disposable incomes and lowest-ever interest rates on home loans.

Analysts said though the current offer is limited till end of October, lenders including HDFC could extend it into the fourth quarter, depending on economic growth and the RBI’S stance on interest rates. Other drivers include tax incentives on interest and principal amount for home loan borrowers and interest rate subsidy for the economically weaker sections and low income groups.

India’s favourable demographics, with 66 per cent of the population below 35 years of age, ensures a large potential for home loans. Analysts also project that rapid urbanisation is set to continue and expect the population of those residing in cities to rise from the current 32 per cent to 50 per cent by 2030.