The entire home loan market was electrified by the bold announcement of an interest rate of 8% by SBI for the first year, for its new home loan consumers. SBI made it clear that the reduced rate was applicable only for the first year and would revert to normal floating rates at the end of the first year. It was not very clear what this revised rate would be.
With home sales falling, banks and housing finance companies are on an overdrive to expand their credit portfolio, leading to claims and counter-claims. SBI fixed an interest rate on all loans including the transferred loans at 8% for a year, and this disturbed HDFC, the numero uno player in the housing finance market.
RBI had started lowering interest rates after realizing that nobody was going to gain if demand for housing was killed, but the actions were not enough. "Interest rates have come down to 11%, somewhere it is 11.5% to 10.50%. Nothing will happen by taking these actions. Something major should be done by RBI and government both to start the rally again."