SBI LOWERS AUTO, HOME LOAN RATES

Mumbai, Aug. 2 -- State Bank of India, the country's top lender, Wednesday announced up to 0.50 percentage point reduction in interest rate on home and car loans.

The relief comes a day after the Reserve Bank of India announced 1 percentage point cut in statutory liquidity ratio (SLR) on Tuesday that is expected to release around R63,000 crore for banks.

The bank said interest rate on home loan of up to R30 lakh will now be 10.25% from existing 10.50 %. Loans of R30 lakhR75 lakh will be charged 10.40% from current 10.75%. Loans above R75 lakh will be charged 10.40% from existing 11%.

Now on, the bank will have only two rates - 10.25% and 10.40% - for home loans.

Interest rate on car loan has been brought down to 10.75% from 11.25%. The reduced rates will come into effect from August 7. The bank has left the base rate, or minimum lending rate, unchanged. The real estate sector, which is struggling due to the combined effects of diving demand, huge debt and piling inventory on their balance sheets, is hoping for a reprieve from Reserve Bank of India's decision on Tuesday to reduce the Statutory Liquidity Ratio.

The move is expected to bring in an additional R63,000 crore liquidity into the system, and some banks may opt to pass on the benefits to new home loans, marginally improving the situation for realty players.

RBI cut the SLR by one percentage point from 24% to 23%.

"There would be transfer of resources from the SLR to the real estate sector whether private or public... this credit would largely go to retail," said Pratip Chaudhuri, chairman, State Bank of India.

"Some banks especially the smaller ones could use this (slash in SLR) as an opportunity to expand their housing loan portfolio and pass on the benefits to new customers for home loans," a senior banker told HindustanTimes on Tuesday.

Cheaper loans, even if only for new customers, could bring some respite for the real estate sector. According to Cushman & Wakefield, new projects - an indicator of the health of real estate sector - were down by 44% in July-September, 2011-12.

Some analysts are still skeptical whether a spurt in new loans alone will help realtors. "This weaker sales picture is unlikely to change until the economy gains renewed traction," said Simon Rubinsohn, chief economist, RICS.

"City property prices may not fall as developers continue to hold on to prices across sub-markets," said Ramesh Nair, MD, west, Jones Lang LaSalle India.

Published by HT Syndication with permission from Hindustan Times.