Compelled by competition, Housing Development Finance Corporation (HDFC) on Thursday re-launched a revised version

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of its dual-rate home loan scheme. The new special scheme will offer home loans to customers at 8.25 per cent fixed for the first year and 9 per cent fixed for the second year.

HDFC’s new scheme will effectively run till April 2010 because the mortgage lender has said the special interest rates would be applicable for home loan applications received till April 30, 2010. HDFC’s earlier scheme offered home loans at 8.25 per cent fixed for the first two years and thereafter, at the then-prevailing floating rate.

The leading home loan provider’s revised scheme was apparently a reaction to State Bank of India (SBI), the largest mortgage lender, extending its special scheme till the end of this month. Renu Sud Karnad, managing director, HDFC, said even though there is a marginal increase in interest rate compared with the earlier offer, our effective rate over a 15-20 year term is very attractive and is much better than other large players in the market offering similar products.

SBI is charging 8 per cent fixed for the first year and 8.50 per cent fixed for the subsequent two years under its special scheme for loans up to Rs 50 lakh.

Karnad said the response to HDFC’s earlier dual rate scheme was overwhelming, adding, “Our cost of funds permitting us to offer a lower initial fixed rate, we have introduced” the revised offer.”

SBI has claimed that it had cornered 84 per cent of the incremental home loan market during April-October 2009, as customers thronged the bank to avail of the very low rate schemes.

HDFC said from the third year onwards, the interest rate will be floating for the balance term. According to the release by the company, “This is a flexible product with dual rates. The fixed rates are applicable for all new loans irrespective of the loan amount.”

HDFC disbursed Rs 33,527 crore in the first nine months of 2009-10, against Rs 27,211 crore in the corresponding period of 2008-09. HDFC said while the fixed rate will remain the same irrespective of the loan amount, the floating rate will vary with the loan amount. Under this offer, the floating rates has two slabs — loans up to Rs 30 lakh, where the rate will be 9 per cent, and above Rs 30 lakh, where the rate will be 9.25 per cent.

This special offer, which has been extended to NRIs and persons of Indian origin, is applicable to all new home loan applications before end of April 30, 2010.