Flexible interest rates attract home loan seekers

Demand for home loans increased by 50 per cent as compared to last fiscal


Banks and financial institutions (BFIs) witnessed a significant growth in demand for home loans in the last few months. According to BFIs, demand has increased by as much as 50 per cent compared to the last fiscal year. In the first two quarters of this fiscal, the construction of buildings was completely halted due to the earthquakes and the blockade. But now with the introduction of new building guidelines, people are opting for building constructions resulting in the increase in demand for home loans.

After the blockade, BFIs had excess liquidity and various banks came up with attractive home loan schemes as low as six per cent. “We were the first institution that took the initiative to introduce home loans at as low as 6.66 per cent for three months starting January to manage excess liquidity,” said Upendra Poudyal, CEO at NMB Bank. He further said, “The market’s response to the scheme was overwhelming and we transacted Rs three billion housing loan during the three months of the scheme.” He said that following their footstep many other BFIs have lowered interest rates to attract customers to housing loans.

According to him, customers mostly apply for housing loan that includes new building construction and purchasing land. He informed that the demand for apartment loans has significantly dropped as people are not confident to purchase apartments after the earthquake. He claimed that the transaction of home loans has increased by 50 per cent as compared to the last fiscal year. Citing that the interest rate is market driven, he said, “We offered lower interest rate in the first three months of 2016. But it is now set to eight per cent.”

According to bankers, people are still in wait and watch mode owing to unclear construction guidelines, delays in passing construction approvals and increase in building cost. “The demand for housing loans could go up if the government provides construction approval on time,” said Poudyal, adding that it takes a few months to get construction maps approved. “We expect that demand will go up in the coming fiscal year as construction and rebuilding of housing projects are starting,” he said. According to him, they get 15 to 20 home loan inquiries on a daily basis.

Machapuchhre Bank is offering their ‘Easy Home Loan’ at 7.5 per cent till mid July. “We are offering the scheme to attract genuine customers who want to construct a house and to manage our excess liquidity,” said Tulasi Ram Gautam, CEO at Machapuchhre Bank. Citing that demand for housing loans is increasing, he said, “As compared to the last three months of the previous two years, we have witnessed 70 per cent increase in home loan demand.” According to him, they had high liquidity as there was no economic activity during and after the blockade.

Gautam further said, “Decrease in interest rate and favourable environment to construct buildings are reasons for increase in home loans.” Talking about interest rates, he said that in the last two years rates have decreased by two per cent.

“The demand for home loans is increasing, however, it could have gone higher,” said Kamal Gautam, CEO at Infrastructure Development Bank (IDB). He said, “As it takes longer to get construction approvals from municipalities, we are not getting home loan applications as much as expected.” However, he said that the demand for loans to purchase land has increased. According to him, the interest rate has decreased by one per cent as compared to the last year. IDP is offering housing loan at 9.5 per cent to 14 per cent depending on loan amount and tenure.