Birla Home Finance cuts interest rate to 7%

Even as most housing finance companies are grappling with rising interest rates, BHW Birla Home Finance Ltd has dropped its rate to 7 per cent. The company launched a new plan called 'Easy Fixed Plus' which carries a fixed rate of 7 per cent.

"Today, no other company is offering a fixed rate housing loan at 7 per cent," Ralph Haerke, managing director, BHW Birla Home Finance Ltd told Business Standard. He indicated that the company could drop interest rates further. It is worth noting that Housing Development Finance Corporation (HDFC) had raised its interest rates by 25 basis points. Other housing finance companies are also known to be mulling over a similar increase following the recent rise in inflation.

According to Haerke, Easy Fixed Plus is actually a combination of two products: a home loan and the company's unique Easy Home Loan Deposit. For half of the loan's tenure, the customer pays an EMI which also includes a small deposit on which the company pays a 5 per cent interest. Once half the tenure is over, the deposit is used to pay back the principal loan amount. This brings down the EMI sharply in the second half of the tenure.

BHW Birla Home Finance Ltd had recently raised an unsecured loan of Rs 96 crore from IFC and securitised its portfolio with NHB for Rs 40 crore. This was seen as a step towards sourcing much more broad-based and competitive funding to survive in the Indian market. Haerke said BHW of Germany, the parent of BHW Birla Home Finance Ltd, would infuse capital into the company whenever required, though the company's capital to advances ratio was very comfortable at the moment.

BHW Birla Home Finance Ltd was originally incorporated as ITC Classic Home Finance in 1995. Later it was taken over by the Birla Group in 1999 through CFCL. In September 2000, BHW Holding AG and CFCL became 50:50 joint partners of Birla Home Finance Ltd. In May this year, BHW Holding AG acquired a controlling stake in Birla Home Finance Ltd after buying out its equal joint venture partner, the K Birla flagship Chambal Fertilisers and Chemicals, for around Rs 100 crore.