A Long(er) Way Home

Clifford Alvares November 22, 2004 00:00 IST A Long(er) Way Home -0001-11-30T00:00:00+05:53

There was a party happening at every home. That may be an exaggeration, but four years of dramatic fall in interest rates had resulted in a mega boom in the home loan segment. And banks were falling over each other in a bid to offer the best (read the lowest) rate to consumers. Imagine, there was a loan available at an unimaginable 7 per cent per annum! You just had to walk in with an application, and walk out with a loan within hours. Suddenly, the fun is being disrupted by a risk-averse party-pooper—the Reserve Bank of India (RBI).

Last week, almost all the biggies, including ICICI and HDFC, announced that the home loan rates will be hiked after Diwali. (SBI increased the rate in September itself.) Says Prashant Joshi, head of retail, IDBI Bank: "It's only a matter of time before rates rise." It was RBI's mid-term credit policy this October that gave a concrete signal that a hike was imminent. One can say that RBI's move was driven by macro factors such as high domestic inflation and the ever-rising US interest rates.

But what has gone unnoticed is that the...