Tuesday 28 August 2012

DDA Housing Scheme 2010 Application Money Loan: Banks War on Interest Rates


The recently announced DDA Housing Scheme has initiated a full-fledged war among banks to woo the buyers for taking the application money loan. The Banks have slashed down their interest rates as compared to last year and also offering waiver on the processing fee. As the banks reveal low interest rates when compared to their rival banks this will benefit the end users. i.e. the purchasers to avail the best Loan.
 
SBI announced a reduction in its total interest package on December 01, 2010 from Rs.5100 to Rs.4600 for availing Rs.1, 50,000 Application money while people wishing to borrow an amount of Rs.50,000 for Application money will have to pay an interest of Rs.1600 only. Many other banks are preparing to reduce their interest rates up to base rate. Banks like Axis, HDFC and ICICI have not yet let their cat out of the bag. Axis Bank is the prime player as it pioneered the Application Money loan in the residential sector.

It is certain that all the banks interested in providing 100% finance for DDA Housing Scheme 2010 will disclose their interest rates and applicable charges by 5th December, 2010. Though the Public Sector Banks have taken a lead in announcing their schemes of lower interest rates but getting a hassle free loan is equally important for the purchasers. Many prospective borrowers are of the view that government banks usually fail to fulfill their promise of a hassle-free loan when compared to private banks. Banks are expecting the sale of application forms to cross the last year’s mark of 5.67 Lakh applicants. As the flats offered are 50% cheaper than the existing market rates, there is a strong probability of higher number of people turning up for the application money loans.

The banks are charging lumpsum interest & processing charges for the application money loan. Some of the banks are also demanding blank cheques for additional interest considering the delay in the draw. Generally, banks reap an interest spread of 2-2.5% over their deposit interest rate, but if they finance the DDA Housing Scheme they get an interest spread of 6%. Application money loan is the safest loan for the bank as the whole amount is deposited as application money. DDA is reaping rich profit from earnest money by investing the sum in fixed or flexy deposits. Central Bank of India and Bank of India have announced an interest rate of 8.5% on Rs.1 Lac 50 thousand earnest money finance amounting to total interest of Rs.4521 and Rs.4782 respectively. Similarly, for Rs.50, 000 earnest money finance Central Bank of India and Bank of India have announced the total interest as Rs.4521 and Rs.4782 respectively.

Before choosing any bank to apply for the DDA Housing Scheme 2010, the applicants must do a thorough survey and then take a wise decision that will prove useful in the long run.
 

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