Prices of houses have more than doubled in Bangalore and Delhi between 2001 and 2005, with Bangalore comfortably recording the highest growth, according to housing price index prepared by National Housing Bank.

New Delhi: In a festival season bonanza, State Bank of India, the country’s largest bank, has decided to lower interest rates on new housing, auto and personal loans by 0.5 to one percentage point.

While consumers can avail of the cheaper loan offer till December 31, sources said, interest rates could stay around the same level even beyond the festival season if liquidity remained comfortable.

A host of banks including HDFC, ICICI Bank, Canara Bank and Bank of Baroda have reduced home loan rates for the festival season. SBI’s move might force them to offer more discounts if it impacts demand.

There’s some good news for home loan borrowers. Banks have started reducing interest rates on housing loans. In the last few days some major banks reduced their interest rates. Others may follow suit shortly.

After the soft interest rate regime, interest rates had moved up about a couple of years ago. Sustained increase in inflation and the measures to control it had further fuelled the interest rate hikes. The Reserve Bank of India (RBI) had to step in and take proactive measures to control inflation. This led to increases in repo rate, reverse repo rate, and the cash reserve ratio (CRR). The aim was to i’educe liquidity in the market. With tightening of liquidity, the interest rates further increased in the short term.

Interest rates are affected by inflation and liquidity. Liquidity affects interest rates, purely by the demand-supply principle. Generally, high demand for money but low supply increases interest rates and vice versa.

India Will Be As Rich As America By 2030: Chidambaram

New York: Finance minister P Chidambaram on Tuesday said that by next year the fiscal deficit will be brought down to below 3%. This is the gap between the government’s expenditure and revenues from sources other than additional borrowing.

“And we are obliged to wipe out the revenue deficit too. God willing, by 2008- 09, we will,” he added. Very simplistically, think of revenue deficits as a loan you take to feed a few hundred people at a wedding; the loan will have to be repaid, but you lose eventually because the expenditure did not create any assets.  Chidambaram was speaking at an event organised by the Asia Society here in New York as part of the Incredible Iidia@60 campaign.