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HDFC cuts home loan rate by 25 bps

Reduction applicable to both new and existiing borrowers; women customers to get another 5 bps discount

BS Reporter  |  Mumbai 

Keki Mistry
Keki Mistry

Housing and Development Corp (HDFC), India’s largest mortgage financier, has reduced rates by 25 basis points to 9.65 per cent. The lender will offer an additional discount of five bps to women.

The new rates, applicable to both existing and new borrowers, are effective Tuesday.

This follows lending rate cuts by a host of lenders, such as State Bank of India (SBI) and ICICI Bank, in response to a 50-bps cut by the Reserve Bank of India at its bimonthly policy review meeting last week. While reduced its base rate by 40 bps to 9.3 per cent, cut the rate by 35 bps to 9.35 per cent. has decided to add a margin of 25 bps to its base rate for new borrowers. is yet to decide whether or not to continue with the same margin (20 bps higher than the base rate).

Currently, both and ICICI Bank’s rate is 9.55 per cent.

Speaking on the sidelines of an event early on Monday, Vice-Chairman and chief executive indicated a rate cut was coming. “You will hear an announcement from our side once the asset-liability management committee meets. Now, we have some sense of how funding costs have come down,” he said.

So far this year, has cut the policy rate by 125 bps. But, most lenders have cut their base rates only 50-70 bps. has expressed concern at the low transmission of policy rate cuts.

“Transmission will happen with a lag effect, but it will happen,” Mistry said, adding would maintain spreads at 2.2-2.35 per cent, its historical levels.

He said the risk weight for housing loans was high in India, adding these should fall.

HDFC cuts home loan rate by 25 bps
At its policy review meeting last week, had proposed to reduce the risk weight on individual home loans. “Currently, the minimum risk weight applicable on individual housing loans is 50 per cent. With a view to improving ‘affordability of low cost housing’ for economically weaker sections and low-income groups and giving a fillip to ‘housing for all’, it is proposed to reduce the risk weight applicable to lower-value but well collateralised individual housing loans. Detailed guidelines are being issued separately,” RBI had said.

With no price increase in the past two years, the residential market had seen a price correction, Mistry said. “We have already seen developers cut prices when buyers sit across the table,” he said, adding and housing companies would pass on the cut in in the next few months. Mistry said and housing companies should be allowed to fund land-buying. Currently, RBI norms do not allow such activity.

First Published: Tue, October 06 2015. 00:40 IST