Housing Loan Interest Rates – What is Happening?

Is building a new house or buying an apartment for one's own use becoming prohibitive even in these recession times? Seems YES in most of the cases. You may wonder why? Although most of the nationalized banks have come down on interest rates, but still the public, at large, is feeling that they are left out. The reason – it is not easy to create an account in a nationalized bank even in these days and the priority for housing loans will be given to those who have an account with the bank.

There are private banks like HDFC, ICICI, IDBI, etc, which have huge presence in India both in terms of real estate (they have huge offices in prime locations of the country!) and customers in India. However, though a few private banks have come down a little bit in terms of interest rates but most of them have not done much in this category (public opinion!). In India, it is everyone's dream that they can have a house of their own. These dreams were shattered by the skyrocketing interest rates in the pre-recession times.

But now, when banks are flush with cash and do not know what to do with those huge reserves, they can use these funds to finance the shelterless people in India at low-interest rates. Although a few banks have decided to give loans at 8% (nationalized banks only), but this interest rate is available only for a short duration (for the next 5 years). Moreover, the availability of housing loan at this interest rate is available up to a few months from now onwards (max up to July 2009 for most of the banks).

Roti, Makan, Aur Kapada (Hindi) has been the slogan of political parties during the mid-1980s. This slogan means that every Indian citizen should get food, shelter, and clothes. Nevertheless, even today, one can see people who are forced to live in a slum-like environment due to lack of affordability and eat only once per day so that they can save the second meal for the next day. There has been change of governments but the economic situation of the common man did not change even after 60 years of Independence.

So, now when the cash reserves are forcing the banks to reduce interest rates, then why they are not supporting the same by implementing the reduced housing loan interest rates?

This blog would like to know your comments/opinions on this topic. Please contribute your opinions.