Rate cuts expected by home finance firms

National Housing Bank (NHB) said it expects housing finance companies (HFCs) to reduce interest rates in the coming days.

“As we have reduced rates, we expect housing finance companies to reduce too and pass on the benefits to consumers. Many housing finance companies have already reduced rates by 50-75 basis points. I expect them to cut rates further,” said S Sridhar, chairman and managing director, NHB.

NHB extends refinance for rural housing projects at 8 per cent, while for other sections, the rate varies between 9 per cent and 9.5 per cent. It has also reduced its prime lending rate (PLR) by 50 basis points to 10.75 per cent.

Following the series of measures, the two largest housing finance companies -- HDFC and LIC Housing Finance -- have lowered interest rates. Earlier this month, HDFC lowered its retail PLR by 50 basis points to 14.50 per cent, while LIC Housing Finance said it would cut its offer rate by 175 basis points to 9.75 per cent for loans up to Rs 20 lakh with a tenure of more than five years.

Sridhar also said that NHB is planning to raise Rs 3,000 crore, mostly through bonds, by June 2009. NHB had raised nearly Rs 7,800 crore in the first half of the year. In addition, the Reserve Bank of India (RBI) had granted it a refinance facility of Rs 4,000 crore.

“Our fund-raising plans will depend on demand. We are also getting Rs 4,000 crore refinance facility from RBI. We could be raising Rs 3,000 crore by June 2009. Our last borrowing was 10 days ago, which was a zero coupon bond, with effective interest rate of eight per cent,” Sridhar said.

NHB is also pushing reverse mortgage scheme and expects to finalise tie-up with insurance companies before the launch of a new annuity product for senior citizens.

“We are in talks with major insurance companies for the new product,” Sridhar said, while referring to the restructuring of reverse mortgage.

Sridhar said NHB was hopeful of extending the tenure of loan to senior citizens under reverse mortgage to their entire lifetime from 20 years at present.