Festive discounts elude retail borrowers

Retail customers' expectation of offers this festive season from banks and financial institutions could result in a letdown. For, most lenders are postponing such offers; some have ruled out any such scheme.

Festive offers of special rates on home loans, car loans, etc, typically begin in August. This year, however, many companies are waiting for competitors to first launch these. Experts say housing and vehicle loans are growing in double digits year-on-year, while corporate loan growth is slow. So, the need to further drive the former is not being felt.

“We will launch a scheme if our competitor comes up with something. Our marketing strategy is reactive,” said an official of a key housing finance company.

The festive scheme generally includes concessional interest rates or waiver of the loan processing fee or even both. Data from the Reserve Bank of India shows that in July, housing loans grew 17.8 per cent over a year before; vehicle loans grew 16.6 per cent.

“The actual festive season will start in October during Dussehra and at that time, the schemes would be launched. More of these will be launched from the start of Navratri. We will have some consumer offers in October for freebies and lucky draws,” said Devang Mody, president (consumer business), Bajaj Finance.

Last year's festive season was not very satisfactory, due to slow economic growth and high lending rates. Though monetary transmission of rate cuts has begun, it is not significant.

Some believe that in these days, buying a house or a car is not limited to the festive season, having become more of a need-based purchase. “We are not planning to launch a festive season scheme for home loans because buying a house is now a year-on activity. Borrowers do not wait for the festive season to time their purchases,” said Anil Kothuri, president and head of retail finance at Edelweiss.

Some bankers believe that though offers around the festival season are expected, these might be delayed, especially in housing loans.  

“Considering that sentiments are subdued and the real estate markets are in a slowdown, banks have been going a little slow on introducing the festive season offers, especially around home loans. People are expecting prices to come down and there is a lot of inventory. As a result, there are no buyers and banks have been slow in launching these offers,” said the head of retail lending at a public sector bank.

An Ambit report said, “Data from property research houses suggest that regions like Mumbai and Delhi would take as much as 11-14 quarters to clear the existing inventory.

Real estate brokers say the time taken to clear these in a healthy real estate market should be four to six quarters.”