There are total 21 Public sector banks, 80 private banks & 1000+ co-operative banks in India along with 10,000+ NBFC’s [non banking finance companies] in India which provides loans to the customers. The home finance market is extremely competitive as many companies struggle to gain the revenue share out of the total market. The Indian home finance market is expected to grow at an annual rate of 22%. As the demand for housing market is massive in India thus market potential is very huge and is expected to grow at a very rapid pace.
Following are the reasons for having a massive market for home loans:
- The population of the country is second largest in the world and is still growing at a rapid pace hence is one of the largest market for home loans in India.
- Also there is a large scale migration of the people from rural to urban region and thus the demand is more in the space-starved congested metros while as tier 2 with bit lesser demand and more lesser demand in smaller towns and villages.
- The trend of nuclear families is growing larger in India and hence many families they own separate houses.
- The higher disposable incomes at least amongst the few in the cities is leading to much positive growth for real estate in India thus leading growth to home finance market.
Challenges faced by the Home finance markets:
- The home finance market is fiercely competitive and hence companies/banks struggle to gain the sizeable market share.
- The home finance market sometimes becomes slack as due to high prices and less liquidity into the market the sale of houses sometimes start declining thus resulting in slack demand for housing and thus impacting the demand for home loans.
- Due to tax defaults or poor CIBIL score applications may get rejected, thus leading to loss of business of the bank/ NBFC’s.
- The stressed assets or under recoveries remain a major problem resulting in non-performing assets, but are easy to recover by seal of assets.
Interest rates of banks for home loans in India is as follows:
|Name of Banks||Interest Rates||Processing fees|
|Kotak Mahindra Bank||6.75%||0.50%|
|Bank of baroda||6.85%||8500-25,000|
|Punjab national bank||6.90%||0.35%[Rs.15,000]|
|Bank of India||6.85%||1,500-20,000|
|Union bank of India||6.80%||0.59%[1,180-11,800]|
|Lic housing finance||6.90%||Rs.10,000-15,000|
|Standard charted bank||7.99%||1%|
|HSBC bank||7.45%||1%[Rs 10,000]|
Tips to reduce the interest rates while applying for a home loan:
- Property at a good location: Properties at good location fetch lesser interest compared to properties based in isolated location
- Good credit score: The good credit score and timely payments of post-paid credit bills as well as timely payment of credit card bills and EMI’s can lead to excellent credit score. Applicants with excellent credit score is given first preference and may be able to avail lower interest rates and lower processing fees. While applicants with average or poor score can avail loans at higher interest rates
- Apply at the existing bank: A valuable or a privileged customer of a bank can help avail lower interest rate and higher credit facility with clear and fast processing.
- Availability of all documents: Applicant having all necessary required documents like pan card, Aadhar card, salary slip, employment letter/ offer letter from employer or in case of self-employed proprietor/partner registration of documents al business proofs, GST invoices and income tax returns for last three years for organisation employed/ self-employed persons. All the banks as well as finance companies need to follow all the guidelines prescribed by the Reserve bank of India. In case of proper documents applicant can get higher credit facility with easy approval and at lower interest rates.
- Proper income proofs: The applicant should maintain proper records of income proofs like salary slip/ bank statement records of salary credits, while in case of self-employed person applicant should maintain proper invoices of the turnover as well as record the turnover and maintaining the record of bank statement so as to obtain the loan in a secured manner, without any manipulations in audit/accounts.
- Early applicant at young age: The early applicants with higher income can avail loans for a longer duration thus benefitting with lower monthly EMI’s. Also surety of longer life expectancy can lead to more confidence for lenders thus helping the applicant get a secured loan in an easy manner.