Byapaar.com – The Indian Business Blog

Amidst global economic turmoil and financial crisis caused by US subprime lending crisis that caused havoc in markets around the world, Indian nationalized banks in consultation with the government have announced reduction of interest rates on home loans of up to Rs. 2 million that could lead to partial impetus in the realty sector. Just last week industrial production in India contracted for the first time in 14 years.

According to the new rates set by the banks, housing loans of up to half a million Rupees will now have interests of 8.5 percent and that of loans between half a million to two million will have interest rates of 9.25 percent. Presently, interest for home loans is 9.75 to 10.5 across various sectors in the banking industry.

This brings very good news for millions common people who can not afford to think of a house or flat beyond Rs. 2 million. Another additional feature of the new housing loan package is that interest rates will remain frozen for 5 years which means clients will not have to worry about increased equated monthly installments (EMIs) during this period. Also they will enjoy the benefit of rate cuts in between while banks will take the burden if rates rise. After five years, consumers could choose either fixed or fluctuating rates according to their choice. This makes debt management a lot easier for the common person.

Not only this, but banks have also reduced the margin requirements for loans. While previously, borrowers were required to pay between 20 to 25 percent of the total amount as margin money, it has been trimmed down to 10 percent for loans up to half a million and 15 percent for loans between half a million to 2 million.

According to bankers, this move will see around Rs. 150 to 200 billion being released over next few years and help the common men who constitute eighty percent of nationalized banks’ housing loan book. (continue reading…)