Interest rate cut alone will not trigger demand, but a cocktail of right moves will help spur home loan demand, said Harshil Mehta,, chief executive officer ofDHFL in an interview.
What's prompting lenders to cut rates in your sector?
The current interest rate scenario is prompting interest rate reductions in this quarter, but we need to see how much of it benefits home loan takers.
We have been able to pass on the benefits of lower borrowing costs to customers as we reduced rates to 9.10% (by five basis points). On the other hand, we have seen our bank borrowing costs drop by 20-30 bps in the last quarter.
For our bond market borrowing, we are witnessing lower rates, but we are yet to assess the overall cost reduction. Subsequently, it will be our endeavour to reduce lending rates.
Will it drive demand?
Interest rate cuts alone will not drive demand but lenders need to frame the right strategies to attract borrowers. There is a lot of potential that can be leveraged through the initiatives.You need to be innovative in products with customisation while identifying right target borrowers, who would be best suited. A combination of several factors including rate, requirement will drive demand for home loans.Hypothetically, a 50-basis points cut in lending rates would only reduce your equated monthly instalment (EMI) by about Rs 260 on a Rs 9-lakh loan with 15year tenure.
Prime Minister has launched schemes to boost rural housing -do you see an opportunity here?
A host of opportunities is lying ahead for housing finance companies like us with strong focus on the affordable housing segment. This opens up opportunities to tap the base and mid of the pyramid through the schemes announced by the government.
The scheme for the urban poor where one can avail of loans up to `12 lakh with 3% interest discount is likely to be popular. For instance, a person in the category can look to buy 225-350 carpet area home even if the pricing is about `6,000 psf which is within reach and hence there exists a good opportunity in the extended suburbs of metros.