Thursday, February 26, 2009

SBI’s low loan rates no threat to HDFC - Edelweiss Securities

SBI: 9.92% whereas HDFC: 9.97%

State Bank of India’s special concessional home loan rate of eight per cent may not prove a real threat to housing loan market leader HDFC, which still offers borrowers a lower overall interest cost, analysts believe.

Analysing the cost benefits offered by the public sector lender’s special home loan rate for the borrowers and the competition it poses to HDFC, equity analysts at brokerage firm Edelweiss Securities in a report said that the scheme would not be “a material threat to HDFC.”

While short-term interest savings offered by SBI is “more or less offset by HDFC’s competitive edge” on factors like ease and quality of service and process time, the average interest rate for the full tenure of the loan also works out to be lower in case of HDFC, they noted.

Under SBI’s special scheme, the rate would be fixed at 8% for the first year, while it would increase to 10.25% from the second year for loans up to Rs30 lakh and to 10.75% for loans bigger than Rs30 lakh.

This would give an average rate of 9.92% for loans up to Rs30 lakh with a repayment period of 20 years, as against HDFC’s prevailing lending rate of 9.97% for a similar loan, Edelweiss said.

When contacted by PTI, SBI officials did not respond to the queries on issues raised in the report.
livemint.com

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