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Home loan segment set to grow in Kerala


Despite fear of a liquidity squeeze, the home loan segment looks set to grow in Kerala, after sending out positive signals in disbursals in the financial year 2009-10.

The recent developments in the money market have forced banks to raise interest rates by 0.25-0.5 percentage points and the current rates are likely to hold for a while, banking sources here say.

It is a good time for the customer to take home loans as interest rates are not going to make any quantum jump in the foreseeable future, said an official in a private sector bank here on Thursday. Though the rates had moved up marginally recently, loans are available from 8.25 per cent or 8.50 per cent.
The Kerala property market appears to be lagging a little compared to markets in the metros such as Mumbai and Bangalore, V.A. Joseph, Chairman and Managing Director of Thrissur-based South Indian Bank, said.

Dr. Joseph felt that non-resident Malayalis were not going in large numbers for additional investments in property as it used to happen in the past. This could be because of the slow property appreciation in recent times compared to the boom period three or four years ago.

However, he said that with interest rate fluctuations appearing range-bound for the time being, more people were expected to access home loans.
An official in a private sector bank here said banks were also a little more cautious now than before in lending. The worldwide economic recession had seen several thousands of NRIs losing their jobs and a rise in the quantum of non-performing assets had sent out a grim warning.

The official, however, said that loans were still not difficult to access for the right person fulfilling the requirements of banks.

The recent prescriptions by Reserve Bank of India for higher risk perception on property loans were not going to affect the interest rates seriously, the official said.
Another recent development in the banking industry has been the introduction of the base rate system, throwing out the benchmark prime lending rate.
The new system will be of help to home loan customers as banks have now been directed by the RBI to price all categories of loans with reference to the base rate. Banks will not be able to lend below the base rate and the actual lending rate charged by the banks will be transparent and available for scrutiny.
The Reserve Bank of India is also clear in its directive to the banks: “Changes in the Base Rate shall be applicable in respect of all existing loans linked to Base Rate, in a transparent and non-discriminatory manner.”

Reports say that in Kerala, over the last financial year, the cumulative outstandings in the home loan segment were Rs.16,955 crore in 4.48 lakh accounts.

- The Hindu Property Plus – 21.08.2010

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