Monday, May 2 2005 17:19 Hrs (IST) - World Time -

Chennai: The interest rates on housing loans are expected to go up by 25 to 50 basis points in the coming months but it would not affect demand from retail borrowers, an industry official said today (May 2, 2005).

"The interest rates on home loans have bottomed out. We expect an increase of 25 to 50 basis points in housing loans in the coming months," said Nitin Palany, managing director, Sundaram Home Finance Ltd, a leading Chennai-based housing finance company.

The possible hike in interest rates comes after a 50 basis points increase in the home loan rates by major players in the last quarter of the year ended on March 31, 2005.

However, this would not have a negative impact on the housing loan industry, which grew at about 30 per cent in last fiscal, he told PTI in Chennai.

The tax sops and high disposable income of the people would drive the home loan industry, Palany said, pointing out that a slight upward movement of the interest rates would not drive away prospective home loan seekers.

Sundaram Home Finance, which is a subsidiary of Sundaram Finance, has shown a 16 percent increase in disbursements to Rs 429 crore in 2004-05, compared to Rs 369 crore in 2003-04.

This is much lower than the industry average of 30 per cent, he admitted. This was mainly due to the fact that the company was going cautious to ensure a good quality of portfolio.

The net NPA of Sundaram Home stood at 1.15 per cent last fiscal, who was much lower than the industry average, Palany said. Sundaram Home Finances gross NPA stood at 1.68 per cent during the period, he said.