It is not interest rates reduction; it is under cutting for housing Financiers. On
the pretext of reducing the interest rates on home loans, Teaser Rates are
back. Housing Financiers follow their
own Prime Lending Rates (PLR) and for this, the Reserve Bank of India (RBI) has
already released the Banks from following the PLR. The RBI announces PLR just
as an indicative level only. Hence, every Bank has its own PLR. According to
Union Budge proposals, the interest rates on home comes under the priority sector
upto Rs.25 lakhs, for which the Government gives subsidy of 1% through National Hosing Bank refinancing schemes. For this, the Government had given funds to
National housing Bank and allowed it to raise funds through Capital Gain Tax
exemption bonds.
Now,
under these circumstances, the Act of Banks in reducing the rates is sheer
market forces pressures and nothing to do with the RBI policies and various
credit rates by which the RBI controls the inflation and other currency related issues. DSA’s and Agents of Banks are now cutting under each other’s Clients
because, Real Estate Industry is going through its worst phase and nothing is
moving. Volumes have declined and New Clients are not entering into it.
To survive in the Housing Finance Market, the Players are now under-cutting in the
name of Teaser Rates. The new reduced rates are not for existing Clients. Under floating rate options, the Borrower must get the advantage of reducing the interest rate but unfortunately, these reduced rates are not for existing Customers
of the Banks, but for the Customers from either other banks or to the new Customers.
The Foreign Banks are more aggressively luring the under-cutting by not announcing
in the Public. But, their Agents are active in the market. The first two to
three years, leverages are been given and then again the same old bad practice
prevails as to not to give advantage of interest rate reduction to the Borrower of floating rate housing finance.
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