In a surprise move the country’s largest bank State Bank of India (SBI) has slashed its interest rates for loans upto Rs. 50 lacs. The rates are fixed for the first 3 years at 8% for the 1st year and 8.50% for the 2nd and 3rd year and the rate thereafter will be 2.75% below the State Bank Advance Rate (SBAR) which is currently at 11.75% – meaning that the floating rate from the 4th year onwards will be 9% if SBAR remains constant.
This works out to an average of 8.76% for loans upto Rs. 50 lacs for a 20 year loan. The existing sops such as waiver of processing fees as well as pre-payment charges (if paid from own sources) continues.
And to sweeten the deal further SBI is also offering its overdraft account facility (called SBI Max Gain) at the same interest rates enabling consumers to further save interest amounts by parking their temperory/permanent surpluses in an account with them which will reduce their interest liability on home loans. You can use this link to find how this facility works. (http://www.apnapaisa.com/loan/home-loan-india/homesavers.html)
This average rate compares very favourably with HDFC’s rate of 8.75% for loans upto Rs. 15 lacs , 9% for loans between Rs. 15 lacs and Rs. 30 lacs and 9.50% for loans greater than Rs. 30 lacs. The rates of the other leading market players such as ICICI and LIC housing Finance are even higher.
Clearly SBI has laid down the gauntlet. As far as they are concerned the small time skirmeshes are over. It is time for a full fledged war. Let’s see how the other players react to this step.
Whatever happens it is the return of happy times for the home loan consumers and by extension for the real estate players who supply residential properties to these consumers. We will need to wait and watch to see if the interest rate cuts can spur new home purchases higher in this otherwise off season quarter.
Keep watching this space for developing implications.