Battle for home loans market to get fiercer

With State Bank of India reducing its interest rates on home loans and car loans and National Housing Bank following the suit by reducing the refinance rates by up to 1%, the home loans market will see tough competition in coming times.

Refinance is the rate at which banks charge housing finance companies (HFC) for low income group housing , which form only a small part of bank's housing finance business. The move by the largest bank, and housing regulator is supposed to create a trend amongst HFCs to pep up the home loan market struck by high rates, increasing cost of property.

The recent cut in statutory liquidity ratio (SLR) and 1.25% reduction in cash reserve ratio (CRR) by RBI would create around Rs. 60,000 crore of liquidity in the system, and RBI wants the benefits of this reduction to be reflected in interest rates for benefit of the customers.