Competition in the housing finance market will further intensify when the State Bank of India (SBI) introduces its short-term loan product offered at sub-prime lending rates. The bank's PLR stands at 11.5 per cent. The proposed five-year product is targeted at customers seeking funds for repairs and renovation.
Recently, ICICI Home Finance took the industry by storm as it reduced the floating rate product at 11.5 per cent against the industry rate of 12 per cent. Sources said the product could be offered at least 50 basis points lower than the bank's PLR. This is expected to fuel competition further.
Currently, short-term loans are available at 10.5 per cent, and this is one area where SBI is keen to corner a share of the market. Thus far, the interest rate on its home loan products is the same across all maturities. "We want to extend the client base and capture the customer who seeks short-term funds for home repairs," said officials.
SBI is looking at home loans as a key growth area in its targeted Rs 18,000 crore personal loan portfolio followed by auto loans. Its existing home loan portfolio stands at around Rs 7,000 crore. The target is to grow the portfolio by another Rs 2,000 crore by the end of the year. The total retail portfolio of the bank is currently at Rs 15,000 crore.
In auto loans, SBI is looking at tie-ups with original equipment manufacturers.
