Chennai, Dec 26 (IANS): Housing loans from LIC Housing Finance Ltd have turned costly with the company hiking its prime lending rate (PLR) by 35 basis points (bps) effective from Monday.

According to LIC Housing, PLR is the benchmark rate to which the interest rate on its loans is linked.

The new interest rates on home loans will now start from 8.65 per cent. The new rates will be effective from Monday, December 26, the company said.

"The increase in rates is in tune with the market conditions. Despite the global headwinds disrupting many economies, India's economic position remains strong. As far as the real estate sector is concerned, there is good sustenance in the home buying activity," MD and CEO Y. Viswanatha Gowd said.

The Reserve Bank of India (RBI) had recently increased the repo rate, or the rate at which it lends to commercial banks, by 35 bps to 6.25 per cent to contain inflation.

Housing finance companies, in turn, borrow from the commercial banks and lend to home buyers.

This fiscal, the RBI has increased the repo rate by 2.25 per cent and the housing loan companies will pass on the increased rate to their borrowers.