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| HDFC warns teaser type home loans could lead to crisis |
| Press Trust of India / Mumbai Aug 07, 2009, 21:46 IST |
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Hitting out at rivals offering home loans at low interest during early years of credit period, mortgage leader HDFC today warned artificial rates could lead to a crisis like the US housing collapse.
"We are seeing some variations of teaser type housing loans being offered. The lure of low interest rate at the start of taking a housing loan is enticing. But are customers are being made aware of future implications," asked Deepak Parekh, chairman, HDFC.
HDFC is the leader in mortgage market. Hotting up the competition for a bigger pie in the home loan market, other lenders, including state-run State Bank of India (SBI), have come with schemes which offer lower interest rates at the start of loan period.
In fact today, SBI announced launching a home loan campaign which offers loans at attractive interest rates and zero processing fee to home buyers during the forthcoming festival season.
Parekh noted that the genesis of the US housing crisis lay in loans that offered artificially low interest rates in the initial years but once the rate normalised, many found themselves unable to service the loan.
These are the lessons one should learn from, he said.
The HDFC Chairman pointed out the same disturbing trend being seen in India where some variation of teaser type housing loans are being offered in the market.
"Are these lending institutions providing 'what if' scenarios to their customers?" he asked.
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