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STATE-RUN banks will now charge 9.25% or less interest rate for the first five years on home loans up to Rs 30 lakh, in a bid to revive housing demand. Banks are working to raise the cap for availing the special offer to Rs 30 lakh by tweaking their loan slabs and keeping the offer open for a longer period, executives said. At present, public sector banks offer a special rate of 9.25% for the first five years only on loans up to Rs 20 lakh, under a special scheme open till June 30, 2009.
Corporation Bank, for instance, would do away with two concession slabs of up to Rs 5 lakh and Rs 5-20 lakh and replace them with a new slab of up to Rs 30 lakh.

"We are working on restructuring slabs for home loans to bring down the lowest slab to Rs 30 lakh. We find that 75% of the demand for home loans was in this segment," chairman and managing director JM Garg said. He said the interest rate for the first five years will be capped at 9.25% or lower. "There is further room for interest rate cuts and our next asset liability committee will take a call," Mr Garg added.

IDBI Bank chief financial officer RK Bansal too confirmed that the bank was in advanced discussions on restructuring slabs while other public sector banks such as Canara Bank have already initiated the exercise.

The move by state-run banks is expected to revive demand for new homes, which has been tottering since last September. Indeed, the December quarter saw an almost negligible growth in housing loan off take compared to the previous quarter.

The demand for lower-priced houses improved in the March quarter, with developers slashing prices and banks coming up with special schemes.

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