By Accommodation Times Bureau
By Dr Sanjay Chaturvedi
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, RBI have already released the banks to follow the PLR. RBI announces PLR just for indicative level only. Hence every bank has its own PLR. According to Union Budget proposals, the interest rates on home comes under priority sector up to Rs.25 lakh for which government gives subsidy of 1% through National Housing Bank refinancing schemes. For this, Government had given funds to National Housing Bank and allowed it to raise funds through Capital Gain Tax exemption bonds.
Now under these circumstances, act of Banks reducing the rates is sheer market forces pressures and nothing to do with the RBI policies and various credit rates by which RBI controls the inflation and other currency related issues. DSAs and agents of banks are now undercutting 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.
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, borrower must get the advantage of reducing the interest rate but unfortunately, these reduced rates are not for existing customers of the banks but from either other banks or new customers.
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 same old bad practice prevails as to not to give advantage of interest rate reduction to the borrower of floating rate housing finance.