Retail customers with home loans, or even those planning to take one, should get ready to pay higher equated monthly installments(EMIs). Banks and housing finance companies (HFCs),whose cost of funds is expected to go after the latest round of hikes in the key rates ? repo and reverse repo ? by the Reserve Bank of India (RBI) on Thursday, are likely to raise interest rates on home loans. HDFC , the largest mortgage finance institution said it would take a call on its lending rates next week. Keki Mistry, CEO & vice chairman HDFC said, ?We will review our loan rates next week. And depending on factors which are linked to our cost of funds, we will decide our rates.?? HDFC said it was hoping to grow assets by about 20% in fiscal 2012. ?The demand for individual home loans continued to be robust, despite rising interest rates as there are other enabling factors including rising disposable incomes and continued fiscal incentives on housing loans,? Mistry observed.

Around 45 scheduled commercial banks raising their base rates by 25-100 basis points after the RBI upped repo rates by 50 basis points on May 3, 2011. Cumulatively, 47 banks raised their base rates by 150-300 basis points between July 2010 and May 2011 following which rates on home loans have risen.

A Krishna Kumar, MD, State Bank of India (SBI) said the bank?s asset-liability committee would meet soon to take a call on loan rates. The bank, which withdrew teaser loans for home buyers, could see demand for home loans taper off. ?If there has been some slackening of demand in the recent past, it is not due to the rise in the interest rates but high property prices,? Krishna Kumar observed. SBI recorded a growth of 21.80 % in housing loans last year to R86,789 crore.

MV Nair, CMD, Union Bank of India said the bank?s lending rates were likely to go up by 25 basis points as a consequence of which home loans were likely to become costlier.?A decision is yet to be taken though there is a case of increasing lending rates, ?Nair observed.

S Raman. CMD, Canara Bank stated that Canara Bank?s base rate is likely to go up by 25 basis points as a result of which home loans rates will also go up. However KR Kamath, CMD, Punjab National Bank believes that there might be status quo on the EMIs of home loan borrowers.

?Interest rates may not rise immediately since we have enough liquidity in the system. Hence, we need to wait and see how other factors like credit demand and liquidity pan out before taking a call on our interest rates,?? he said. PNB?s home loan portfolio grew by 24% to R12,000 crore during 2010-11 with demand strong in tier-II cities like Pune, Nashik and Nagpur. M Narendra, CMD, Indian Overseas Bank said the bank?s base rate may go up by 25 basis points in the short-term which would impact home loan borrowers.

– High rates may scare away home buyers

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