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SBI to refinance housing loansnews
Uday Chatterjee
08 October 2001

Mumbai: Indias largest commercial bank, the State Bank of India (SBI) is now planning to enter the housing finance business by refinancing housing loans from other housing finance institutions. The bank plans to refinance these loans at 12 per cent.

SBIs housing finance portfolio for the current year has grown by Rs1,000 crore, but is far short of the target of Rs 3,000 crore for the current year. With the coming festive season, the bank expects the demand for housing loans to pick up as buyers tend to purchase houses at auspicious times.

The refinance rate of 12 per cent will be attractive for borrowers, who are presently paying rates of 15 to 16 per cent. The switchover will bring about considerable reduction in cost to the borrowers. Further, SBI computes its interest on a monthly reducing balance basis while most housing finance institutions base their instalments on a yearly reducing balance basis. This also will bring down the cost to the borrowers, who will also continue to enjoy the tax breaks, which they enjoyed in the earlier loans.

SBI also perceives the refinancing facility to be secure as the payments will be made to the housing finance institutions, and not to the borrowers.

The charge on the property will also be in favour of the bank.

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SBI to refinance housing loans