APRIL 4, 2007: Growth in the home loan
market may see a drop of 10 percentage
points or more from the current 30 per
cent following the recent increase in
interest rates. Leading bankers expect
the number of transactions to fall 30
to 35 per cent as buyers wait for a price
correction in real estate. ICICI is not
planning to reduce its credit exposure
to home loans, other growing businesses
might start making a larger contribution
to the credit portfolio.
The rapid increase in interest rates
and the imminent correction in property
prices, more so commercial property prices,
will force investors out of the market.
"A home loan qualifies for tax benefits
of Rs 1 lakh on the principal amount repaid
and up to Rs. 1.5 lakh a year on the interest
paid."
After factoring in the tax benefits,
the effective interest rate on home loan
works out to around 6.5 per cent on an
interest rate charged at 11.25 per cent
The bank is reducing its 25 per cent credit
exposure on personal loans (with home
loans having the majority share) to 22
per cent.
Source: Rediff
