RBI Willing, Interest Rates Will Fall By Up To 0.5%

The Economic Times

HDFC, the country’s leading housing finance company, has said that interest rates will come down 25-50 basis points, if the Reserve Bank of India (RBI) does not raise interest rates or cash reserve ratio on January 29. The housing finance company said it would take a decision on rates after the RBI policy.

Speaking at a global trade and investment conference organized by the Indian Merchants’ Chamber here, HDFC Chairman Deepak Parekh said that a 25-50 bps fall in interest rates is expected, following the credit policy.

Incidentally, HDFC has extended a festival discount scheme, which was to end in December, till end-January. The company has also realigned interest rates in some categories, resulting in borrowers in the Rs 20 lakh to Rs 1 crore categories getting a 25-bps benefit in interest rates.

HDFC has been offering home loans at 10.25-10.5% as part of a festive offer, and the chairman’s recent comments indicate that these rates might continue for a while.

He added that the bank had seen a loan growth of 25% during the current quarter. “While property prices in the suburbs of Mumbai seem to have plateaued, rates in areas like South Mumbai and Delhi are not showing any such signs,” according to Parekh.

Taking a cue from the Tatas’ latest people’s car, Parekh said builders and the government needed to look at affordable housing as well. “With builders going in for more luxury housing, affordability seems to have been thrown out of the window. There is a need for disincentivising such builders by taxing them more,” he added.

Parekh warned that the subprime crisis in the US might still have an impact on India. “India is resilient, but not immune to global events,” he said. A possible economic slowdown in the US could result in companies cutting down on their IT spends, thus impacting software development activities and outsourcing to India, he felt.