Among the forerunners, ICICI has revised its home loan offerings. Incidentally, GIC Home Finance Limited (GICHFL) reduced its interest rates even before HDFC did. Senior officials of LIC Home Finance Limited (LICHFL) deliberated on the interest rates at the board meeting on Friday. Also, others such as Citibank and Hong Kong Bank are constantly looking at the competition, say their respective officials. State Bank of India, a competitor in the segment, has surprisingly not joined the bandwagon yet.

It was the second revision this year for HDFC, the first one being inMarch. This time around, it has clubbed the two loan slabs--Rs 2 lakh to Rs 5 lakh and Rs 5 lakh to Rs 10 lakh. As a result, one can borrow up to Rs 10 lakh from HDFC at 13.5 per cent. This is against the earlier interest rate of 14.5 per cent for a loan of Rs 5 lakh to Rs 10 lakh. Now, for a loan of Rs 10 lakh to Rs 15 lakh, you need to pay an interest of 14 per cent, and for anything above Rs 15 lakh, the rate of interest is 15 per cent, provided you make the repayments in 10 years.

GIC Home Finance, which has also effected a change in its home finance rates recently, offers competitive rates. For a loan up to Rs 5 lakh, you pay an interest of 13.5 per cent; for Rs 5 lakh to Rs 10 lakh, you pay 14 per cent; for anything over Rs 10 lakh, you pay 15 per cent. The maximum repayment period is 15 years in the case of this financial institution. However, there is a provision to stretch the repayment period to over 15 years at an extra 0.25 per cent rate of interest.

Apart from GICHFL, Punjab National Bank(PNB) is another player in this segment which was already offering home loan at a low of 13.5 per cent. Says A K Jain, senior manager, PNB, that the bank is not planning any further reduction because it's already offering a competitive rate. Explaining the trend of banks and FIs bringing down interest rates on home finance, Jain says that there are surplus funds with these institutions, and less deployment. Since home loan is a good form of long-term fixed deployment, banks and FIs are trying to attract more customers to their financing products. Another reason, Jain says, for making the home loan product attractive is that there's hardly any default in this category.

Falling in line with the going trend is LICHFL. According to officials, a change in interest rates and other positive steps on home loan were expected following LICHFL's board meeting on September 3. As of now, LICHFL's loan structure is like this: For up to a loan of Rs 5 lakh, the rate of interest is 13.5 per cent. For Rs 5 lakh to Rs 15lakh, it's 14.5 per cent. For over Rs 15 lakh, it's 15 per cent. The maximum repayment period is 15 years, but for a 20-year repayment structure, one needs to pay 0.25 per cent extra in interest.

Another financial institution, ICICI, has also been watching the reduction in interest rates in home loan products. But says Harsh Rungata, head, Retail Finance, ICICI, that it's the value of service that matters more than anything else. ``We offer home service even to the lower end of the market,'' he says. Nevertheless, ICICI went ahead and revised the home loan interest rates just two days after HDFC had done it. According to the post-revision rates, you can take a home loan of up to Rs 10 lakh from ICICI at 13.5 per cent and anything over Rs 10 lakh at 14.5 per cent. Earlier, you could borrow up to Rs 5 lakh at 13.5 per cent, and anything over Rs 5 lakh at 14.5 per cent. The repayment period remains 15 years at ICICI.

Says Rungata that the focus is now on offering a lot of choice to the customers, unlike the``only vanilla product'' phenomenon earlier. He adds that banks are offering a plethora of products to their customers to stay in competition. ICICI, being in the forefront of this business, is offering options and quality service to the customers, adds Rungata. Citibank, a leader in many ways, too may announce interest rate revisions for its home loan products. However, senior officials of Citibank are not willing to admit yet that a rate revision is likely. Says Sarvesh Sarup, Country Sales and Distribution Head, Citibank: ``We are constantly reviewing our products.'' And yes, Citibank is looking at its competition and the reduction of interest rates as well. Right now, Citibank offers loans at 15 per cent for Rs 2.10 lakh to Rs 5 lakh; 15.5 per cent for Rs 5 lakh to Rs 10 lakh; 16 per cent for anything over Rs 10 lakh.

Another multinational bank quite active in the home loan segment, Hongkong & Shanghai Bank, is not coming forth on whether a change in home loan structure is being planned in response tothe HDFC step. But Malini Thadani, manager, Public Relations, HSBC, says that it's Hong Kong Bank which is the pioneer in offering options to customers, and others like HDFC only followed it. Says Thadani, ``We introduced the option of floating rates and fixed rates, and HDFC did the same after us.''

But the point is that the current trend is good for customers. As Rajesh Arora, a property consultant, puts it, a move to reduce interest on housing finance loans is a very positive step to encourage the end users, mainly the service class, to take the initiative of owning a house.