Mumbai: Interest rates on housing loans look set to follow the downhill route. HDFC, the biggest player in the home loan segment, may cut home loan rates next week. The housing major says the cost of funds has come down by half a per cent over last month.

"The interest rate may go down. HDFC was reviewing interest rates and any change will be announced in the next few days. Overall the industry will be reducing interest rates. HDFC could make a maximum of 50 basis point cut," HDFC Chairman Deepak Parekh said.

Parekh said he expected loan growth in Q2 this fiscal at 26-27 per cent for HDFC while aiming for a growth of 20-25 per cent for the whole fiscal.

"There is a case for an interest rate cut. A decision in this regard will be taken next week but we have not yet decided on the quantum of the cut," HDFC Executive Director Renu Karnad said.

"The funding costs have come down by 50 basis points and we are reviewing our lending rates in a week's time," Parekh stated.

"There is a huge inflow of remittances, FDI and FII which could be inflationary so we should behave with caution and not do anything in a hurry."

"Property prices have softened, sales have slowed down and the investor is out of the system," he maintained.

Asked about a rate cut by the Reserve Bank of India in the light of moderating inflation rate, Parekh said though there was a case for cutting rates, one had to be cautious of the money supply in the system.

(With agency inputs)