With the ongoing urbanization, the demand for housing in India is ever-increasing along with the growing population. The urbanization process is characterized by a remarkable increase in the size of cities. However, India may be said to be in the midst of a transition from a predominantly rural to a quasi-urban society.
Housing demand has increased across the country as a result of changing lifestyles, societal perspectives, and expanding labour mobility. Moving into larger residences is more likely as income grows. Younger borrowers of housing loans, increased need for independent homes, government programmes to provide cheap housing, and interest concessions under the Pradhan Mantri Awas Yojana is also a contributor to rising housing financing demand.
Traditionally, banks have been the most significant player in the housing finance market, holding the bulk of India’s total home loan portfolio. Banks are also responsible for disbursing a majority of the housing loans to higher-income bracket customers.
The economically weaker section of the population is primarily dependent on informal sources of borrowing to construct houses, as it does not have access to institutional sources. This presents a substantial opportunity for niche housing finance companies that focus on lending to lower and middle-income segments and those with an uneven income pattern.
Housing is a multifaceted economic activity with both broad and microeconomic effects. Therefore, the regulators, lenders and other market participants play a significant role in catering to the growing housing needs.
It is significant that the government is encouraging affordable housing through various schemes. The interdependence of growth in the real estate sector with other segments of the economy necessitates a conducive policy environment, modern infrastructure and an investment friendly climate.
India’s residential sector, which accounts for more than 80% of the country’s real estate market, has witnessed a strong rebound on the heels of the pandemic. The demand has persisted despite the economic challenges brought on by high inflation.
The housing finance sector in India does, however, face several challenges, including inadequate infrastructural development, high cost of land acquisition, and non-availability of long-term capital for investment, all of which must be swiftly overcome. Still the Indian financial sector has recently exhibited an encouraging trend. The amount of outstanding mortgage loans has increased by a healthy 16 per cent over the past 5 fiscal years. The main drivers of this trend are rising disposable income, strong demand, and an increase in new competitors joining the market.
Housing Finance Solution
The majority of individuals may only realise their ambition of owning a home through a home loan. This is due to the escalating cost of real estate in India. Lenders now provide a variety of housing finance solutions to better satisfy the demands of the borrowers.
People now have a wide range of expectations for a house loan nowadays. Several financial institutions provide particularly designed house loans for women, agriculturalists, and loans just for the acquisition of land, to name a few.
Home loans solutions available
Loan for purchasing a piece of land: Once a buyer acquires a piece of land he may build a house as soon as he has enough money. Buying a plot gives the buyer the freedom and flexibility to start building his own house according to his specifications.
Loan for constructing a house: This financing is specifically intended for persons who would like to build a home from its foundation rather than purchase one that has already been built. The loan may be disbursed entirely at once or in several phased payments.
Loan for purchasing a house: This loan is designed for individuals who want to buy a ready-to-move-in property than to build a house from the ground up.
Loan for extension of property: This kind of loan is for homeowners to borrow money if they wish to expand their current property. It could be used to build a garage or add an additional bedroom to the house, for instance.
Loans for improvement of houses: A home improvement loan is a loan available to renovate house and fund its repairs. The loan can be used for internal and external home renovation such as painting and whitewashing, tiling and flooring, waterproofing, plumbing and sanitary work, and more.
Loans against the property: A loan against property is taken by keeping an existing residential or commercial property as security. The loan can be used to fulfil various purposes such as expanding business or to funding child’s education.
Role of Banks and NBFCs in Housing Finance
Dozens of banks and non-bank financial companies (NBFCs) across India help millions of people realize their dream of owning a property. This even covers people from all walks of life who cannot afford to make a one-time payment to purchase a home. Housing Development and Finance Corporation, an NBFC, was the first to offer housing loans in India.
Several banks and non-bank financial companies (NBFCs) have jumped on the bandwagon in the recent two decades and now offer affordable housing financing. Besides banks as a home loan provider the other key players in India home loan market include SBI Home Loans, PNB Housing Finance, HDFC Housing Finance, LIC Housing Finance, L& T Housing Finance, Indiabulls Housing Finance, DHFL, ICICI Housing Finance, Aadhar Housing Finance Ltd., Edelweiss Housing Finance Ltd, Can Fin etc.
Emerging Technologies Transforming Mortgage Industry
Technology has revolutionised the global markets and changed how people borrow loans in the Indian markets. Convenience is the need of the hour, and technological improvements ensure maximum consumer comfort even while borrowing a home loan.
Banks, NBFCs and HFCs are investing in modernized business models, powered by a variety of new-age technologies, to enable the seamless design, launch, and implementation of unique and customized products and services.
With the goal of catering to a wider range of customers, these financial institutions are looking at digitally transforming their end-to-end processes, thereby differentiating themselves from incumbent banks and delivering a superior experience.
By implementing a huge range of modern technologies, including integration with India Stack (for KYC purposes and so on), integration with CIBIL and other credit score agencies (to assess credit evaluation) artificial intelligence (AI), machine learning (ML), robotic process automation (RPA), mobility, predictive analytics, and chatbots NBFCs and HFCs are completely redefining the way they transact with internal and external customers.
Accelerating digitization efforts enables:
- Remote customer interactions, through video KYC and eSignatures
- Anytime-anywhere accessibility with mobile apps and self-service portals
- Contextual, personalized, and omnichannel engagement with customers
- Streamlined operational workflows for greater productivity, accuracy, and cost efficiency
- Increased data security, using distributed ledger technologies
NBFCs and HFCs have an opportunity to gain a significant advantage over their traditional banking counterparts by rapidly adopting new-age technologies. Platform-based solution helps them to optimize their resources and processes, expand their customer base to reach a wider socioeconomic audience, leverage strategic partnerships, and increase revenue, all while staying risk-free, compliant, and competitive.
Almost all the financial institutions today have perfected the process of applying for a home loan online through various channels – forms hosted on their websites, interactive home loan application processes and even an end-to-end application journey that can be completed on texting applications. In today’s environment, online is the way forward, and the home loan industry is fast catching up. It is not only easy and hassle-free, but also quick, to keep up with modern needs and demands.