Even though banks have traditionally been the most significant players in the housing finance business, holding the majority of India’s overall house loan portfolio; things have however transformed now, and several housing finance organizations have become prominent; while focusing on lending to rural unbanked individuals, or middle-income groups, and those with an inadequate income documentation as opposed to the traditional banks’ needs for advancing a housing loan. The buyer can get 75% to 90% of the home price as Home loan, subject to quantum of loan and other internal parameters of the Banks/HFCs. Furthermore, to qualify for a home loan, you must meet specific criteria such as age, employment, credit score, income, and residency.
The demand for home loans has risen substantially in recent years, and people’s expectations of home loans vary greatly. According to market research published by Netscribes India, “the housing finance market is anticipated to grow at a brisk rate of 20.58% during the fiscal years 2022-2027, owing to rising urbanization and low mortgage rates”.
As a result, if you intend to invest in property, it is critical that you understand the various types of housing finance options available to you. These offerings have been designed to address the financial demands of various population groups. So let’s delve into some of the most common segments of housing finance offerings.
Segments of Housing Finance Offerings
Loans for Purchase of Constructed/Under-Construction Property: Owning a home is notably the most prized ambition for most people. In this context, the most prevalent home finance offering developed is purchasing a constructed or under-construction property. This section is intended to assist you in purchasing a home that you can call your own. Home loans are traditionally provided both by banks and Housing Finance Companies (HFCs) in India; but the later have sprung into the spotlight, intending to offer a hassle-free experience in realizing your ambition of purchasing or self-constructing a home.
Home Improvement/Extension Loans: Looking to add a floor to your existing property or equip your old home? With home improvement loans, you can quickly repair and maintain your home to improve your quality of life. With home remodeling or improvement loans, you can add a level to your home or a new room to your existing residential unit to make your living more pleasant and serene. Home improvement loans are intended to assist individuals in renovating or repairing their homes. Typically, the loan amount is determined by the cost of the renovation or repairs.
Loans for Home Construction: Home construction loan is a type of loan that is usually chosen when you wish to build a residential house on a piece of residential land owned by you. Borrowers get loan disbursal as per stage of construction of the property and also get moratorium of principal payment till completion of the property subject to a maximum period which is generally 18 months from the date of first disbursal or as per the internal policy of the HFC/Banks.
Plot Purchase/Cum Construction Loan: This segment is ideal for you if you want to purchase a piece of land to build a home now or in the future. Under this scheme you get loan for buying residential plot and also for construction of house over it. A maximum time of 3 years is granted to complete the house to qualify this as housing loan otherwise the Banks/HFCs can reclassify this as non-housing loan. By choosing a loan from a housing financing company, you may enjoy personalized and hassle-free customer care, simple documentation, transparent processes, attractive interest rates, and quick and efficient loan processing. Furthermore, consumers can effortlessly match their needs with available funds and select an acceptable approach with the help of the financial institute’s personalized service.
Loan against Residential/ Commercial Property: A Loan against Property allows you to borrow money by mortgaging your own residential/ commercial real estate. The property could be used for your company’s operations or any other profit-generating endeavor. Loan against Property is an alternative if you require significant money rapidly, such as to grow your business or buy expensive equipment.
Lease Rentals Discounting: Lease rental discounting is financing available to property owner against leased contracts. The rental receipt is escrowed for making the repayment of the loan. If you wish to borrow money against your rental revenues, this financial option enables you to do so.
Loan for Commercial Property Purchase: Loans have made our lives more accessible over the last decade. Banks and private companies have established several loan programs throughout the years to satisfy the financial needs of their customers, one of which is a loan for commercial property purchases. This loan assists a person in purchasing an office or shop for business/rental purpose.
There is no denying the fact that owning a property has grown in value over the years; nevertheless, spending all of your money on it is not advised. This is where housing financing has increased dramatically, making buying a dream home or property easier. In fact, housing finance organizations have risen to prominence, delivering a wide range of financial services to various parts of the population and segment. As a result, it has become critical to review and prepare your financial goals and assess your ability to repay before selecting a housing financing package mentioned above.
(The writer is MD, CEO and Co-Founder, SAVE Solutions)