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Affordable Housing Finance in India: A New Opportunity in the Housing Segment

The Indian housing finance market is worth around Rs. 10 trillion. It has been growing at a rate of 18 to 19% over the past few years. Yet, it is still a mere 8% of the GDP. This is relatively small, compared to mortgage markets in countries like China.

Recently, we were introduced to the Affordable Housing Scheme. It has been given an impetus in recent years. Ever since, many more financial institutions are eyeing this growing segment. More lenders are coming in. New and existing lenders are expanding their portfolios of low-cost Home Loans.

Affordable Housing and Home Loans

The Affordable Housing Scheme helps people in the low-income group buy a house.

Demonetization has brought an influx of funds into banks. To profit from this surge, they have promoted many loans. Many financial institutions are eyeing low-cost housing finance. This is a segment that has huge potential for growth.

We have access to many affordable housing units now. What’s more, lenders have lowered interest rates. The government has offered subsidies on low-cost Home Loans. More people in the low-income group can take a Home Loan to buy a house that fits their budget.

The Affordable Housing Market

The low-income housing market is worth a considerable amount. We have approximately 2.2 crore households across the country. With so much potential, more lenders are jumping in. Already, established lenders are adapting. They allocate a large part of their monthly Home Loan disbursals towards low-cost housing finance.

The RBI also recently relaxed its norms on external commercial borrowings. They carried out this move to encourage loans for affordable housing units.

Subsidies on Small Home Loans

The PM addressed the nation on New Year’s Eve. He announced that the government would provide a 4% rebate on interest. This was for loan amounts up to Rs.9 lakh. He also announced a 3% rebate on Home Loans up to Rs. 12 lakhs.

The Home Loan Scenario in India

RBI Guidelines instruct banks to use MCLR as their internal benchmark for lending rates.

Lenders have begun the process of passing on the repo rate cut benefits to their customers. Led by the State Bank of India (SBI), banks have now started cutting their lending rates. These interest rate cuts have now made Home Loans cheaper than they were even a few months ago. For the same Home Loan amount, the EMI could be smaller. You can also opt for a shorter tenure, still within your budget.

This has made Home Loans an attractive financial prospect again. The sluggish market is keeping real estate prices down. These two factors mean that you can expect the Home Loan segment to keep growing.

A Good Time to Buy Homes using Home Loans

This is a good time for home buyers, irrespective of their income group. Calculate Home Loan eligibility and buy the house that you have waited for so long. The RBI is now enabling 90% LTV ratio on Home Loans up to Rs.30 lakhs. Benefits are not limited to the low-income group. Even the lower middle class can now afford to buy better houses than a few months ago.

Take note of these interest rate cuts, the MCLR reform, and low-cost housing. These have now opened up opportunities for millions of potential homeowners. Improve your credit score, gather the funds for the down payment needed in the home you want. Use Home Loan EMI calculator to find the best Home Loan offers, and buy that house.

If you had taken a Home Loan before April 2016, switch to MCLR system from base rate. This way, you can take advantage of the sliding lending rate scenario.

Written By

Daina Martin is a freelance author and writes for a variety of online publications like Huffingtonpost, and etc.. She actively writes blogs and articles related to Eco-friendly resources,health and technology. When she’s not working, she likes to cook, dance and travel.

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