Home loans to be dearer

With the Reserve Bank of India (RBI) cautioning banks yesterday against reckless lending to the real estate sector, getting bank loans for the housing industry is expected to become difficult and costly, analysts said.

Although an increase of 25 basis points in the repurchase rate, the interest charged for buying back government securities, will not affect liquidity, the caution on the high growth in housing credit may affect the rates, they said.

It is believed that banks having liquidity problem may charge a higher price for personal loans, real estate, equity market and consumer goods loans. Also those banks borrowing from the Reserve Bank to meet their liquidity demand may jack up the interest rates.

The RBI in its review has said that available information points to high growth in credit extended by banks to fast growing sectors such as housing, commercial real estate and retail loans.

Experts, however, said the increase in the repurchase rate to 7.25% was far too small to impact liquidity of banks. They feel that the cautionary advice by the central bank would also mean a greater level of monitoring by it to avert situations like those in some Southeast Asian countries in the late 1990s.
– IANS
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  • Interest Rate wars

    The Home Loan business is to witness cut throat competition in the coming months.
    Reliance is gearing up to launch its home loan business loaded with a huge arsenal and use its already extensive network to push its product
    Many other biggies from the Indian Corporate world are making an entry into this lucrative and ever expanding market.
    At this juncture, interest rate war will intensify as new companies will try to get a foothold in the business and the consumer is sure to benefit
    Margins may be sqeeuzed, but at higher volumes of business, it will more than make up for the lowered business income.

    Ram
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