Why SBI Reduced Its Home Loan Rates To 'Lowest' In Market
SBI or State Bank of India on Monday announced a 25 basis points rate cut on new home loans. The new rate will be effective on new home loans from May 9 to July 31 this year, Rajnish Kumar, managing director of National Banking Group at SBI, told NDTV Profit. "The idea behind this (reduction in home loan rate) is to give a push to affordable housing. There are many people who are in the process of deciding whether to buy or not to buy...After Real Estate Regulation Act, there's some uncertainty within builder community also. Overall the idea is to promote affordable housing," he said.
"We have reduced our rates (home loan) by 25 basis points for the salaried borrower where the loan amount is less than Rs 30 lakh. This will be applicable to all house loans sanctioned from May 9, 2017 up to July 31. Otherwise also, we have reduced the rates by 10 basis points on most loans above Rs 30 lakh," Mr Kumar added.
The Real Estate (Regulation and Development) Act, 2016 or RERA, came into effect in many states on May 1. The home loan rate move by SBI, which claims to be the largest provider of home loans in India, came days after India's largest bank cut its term deposit rates in select maturities. (Also read:Â Why SBI cut its fixed deposit rates)
Here are few things to know about SBI's rate move:
The effective interest rate for all customers will be 8.35 per cent for loans up to Rs. 30 lakh, which SBI claims is the "lowest in the industry".
The interest rate for home loans above Rs 30 lakh has been reduced by 10 basis points to 8.5 per cent, said another SBI official.
Eligible borrowers can also an avail an interest subsidy of Rs. 2.67 lakh under 'Pradhan Mantri Awas Yojana', a scheme launched to promote affordable housing for the poor in urban areas.
The rate cut will give a fillip to the affordable housing segment
SBI has come out with special offerings for construction finance to the builders for affordable housing projects
Asked what kind of competitive edge the rate cut gives to SBI, Mr Kumar said: "Competitive edge does not nearly come from pricing. It comes from distribution, it comes from turnaround time, it comes from sales team ...but yes, pricing also plays a role...Overall the idea is to promote affordable housing. Generally these are lean season, in that also we want to give it a push."
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