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Cut in housing loan rates lifts HDFC
February 05, 2003 14:42 IST
HDFC advanced on Wednesday, after it slashed interest rates on individual home loans with immediate effect.
The scrip of the housing finance major was up by 1.2% at Rs 375 on the BSE by the first half of the session. It hit a high of Rs 376, recovering from the day's low of Rs 370. 247,000 shares changed hands on the counter.
From a late August 2002 low, the Housing Development Finance stock has witnessed a sustained rise on the bourses. However, it witnessed alternate bouts of buying and selling in December 2002 on reports regarding plans for removal of tax sops on housing loans.
The Kelkar committee on tax reforms earlier recommended removal of tax sops on housing loans, but in a revised report the panel suggested continuation of tax benefits on housing loans, albeit in a diluted form. Tax sops besides low interest rates have been responsible for the recent boom in the housing loan business. Tax sops are considered vital for the growth of the housing finance sector. The HDFC scrip currently trades close to its all-time closing high of Rs 377.45 on 23 January 2003. The stock is a favourite of foreign institutional investors.
Today's rise on the HDFC counter comes after the company announced a cut in interest rates on individual home loans under the fixed rate option as well as variable rate option, with effect from 5th February 2003. It has slashed both variable and fixed interest rates by 0.50% to 0.75%. HDFC's retail prime lending rate has also been reduced by 0.25% to 10%, benefiting the customers who have availed of loans under the adjustable rate home loan scheme, which is linked to the RPLR.
ARHL rates for a loan tenure of up to five years on monthly rest basis is pegged at 9% (9.5% earlier). In case of six to 10 years and 11 to 20 years, the new rate will be 9.25% (10%) and 9.75% (10.5%) respectively.
HDFC's rate cut follows similar moves recently by SBI and ICICI Bank. HDFC, ICICI Bank and State Bank of India are three leading players in the housing finance sector, that is currently witnessing a boom. Yet, the three are competing intensely with each other. HDFC is the number one player in the sector but analysts said it is vital for HDFC to maintain its spread in the face of tough competition from SBI and ICICI Bank.
HDFC has attributed the latest lending rate cut to a decline in its deposit rates. Through active liability management, HDFC has been able to achieve a cost of borrowing which is significantly lower when compared to other companies in both international and domestic markets.
HDFC reduced its retail deposit rates by 0.50% on varying maturities on 29 January 2003. This was the fifth time during the current financial year that HDFC has slashed its deposit rates. It has effected a 325 - 350 basis points reduction in its deposit rates since April 2001 and a reduction of 175 - 215 basis points since April 2002.
BSE Code: 500010
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Source: www.capitalmarket.com
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