Eased inflation not to lower housing loan rates: Parekh

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Kolkata, Nov 13 : Prospective home loan buyers could be in for disappointment if they thought banks now have further scope for reducing interest rates as inflation surprisingly has come down to single digit.

Bankers, including country’s largest housing finance company HDFC, have indicated that interest rates on home loans are unlikely to fall in the wake of a decline in inflation. Pointing out that cost of funds, a determining factor in deciding lending rates, remains high, HDFC chairman Deepak Parekh literally ruled out slashing home loan rates.

“Inflation might have come down, but the cost of money has not. Hence, there is no chance of home loan rates falling down further,” Parekh said. He was responding to a question whether the decline in inflation would lead to soft interest rates.

Inflation for the week ended November 1 fell by by 1.74 percentage points to 8.98%.

Public sector Union Bank’s chief MV Nair also hinted that lending is likely to continue at the same rate as it (interest rate) is “affordable” now. “Home loan rates have come down substantially. Public sector banks have lowered rates. I believe it is affordable now. I would say a genuine buyer should not postpone his buying,” Nair, CMD of Union Bank, said.

Lending rates had gone up significantly after a series of measures adopted by the Reserve Bank to tighten the money supply in a bid to bring down inflation which was hovering around over 12% in September.