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Home loans-the best way to own a home
By Aditya Jaiswal
In the last decade or so, housing loan scenario in India has changed drastically. It has become a major part of buying houses and people are looking forward to owning their own houses on the base of these loans provided by almost every bank in India today. It is no more a cherished dream that required lifetime saving and a difficult decision to make. Today the new purchase loan is easily available and is very cheaper as compared to what was available earlier. Banks are now everywhere and the schemes are implemented even in villages and smaller towns. The housing loans are popular there too, however, the activity of building flats is little slow. It would not be wrong to say that there has been a boom in the loan market and with this boom; there is also a boom in the number of loans mortgage brokers in India. The main reason for this boom in loan market is the change in government policies. It is our government's motivation that the loan interest rates in India have fallen greatly. Lots of loan provider banks are offering loans at very low EMIs (equated monthly installments). High EMIs are now a thing of past. Today lending rate is in the range of 7.5 to 15 %.
There are different types of loans available today. The interest rate available is also of two different types. One is the fixed rate loan and the other is the floating rate loan. In the fixed rate loan, whatever interest is fixed on the start of loan is carried on for the complete period. However, in the other one, the interest rate is not fixed and as the interest rate goes up or low the effect is directly transferred to the person who is taking the loan. In the last few years the floating interest rate has been a favorite among most of the people taking loans.
Another option which is available today is construction loans. This loan is available to those who want to design their homes according to their requirement and taste. In other words, this loan is meant for those who themselves want to construct their new home.
Indian middle-class, which is estimated to be 216 million strong, is coming off its conventional aversion to take loans for buying homes, consumer
electronics, and automotives, as per Mckinsey & co. a New York-based consulting firm. As a consequence of this change in the perception of India middle class, there has been a continuing increase in retail lending. Compared to 13% four years ago, retail lending increased 69% of the loan portfolio of ICICI. Banks have been eased up and can now give away the loans they weren't able to provide three-four years before. Increased costs of borrowing have not smashed credit growth because rising incomes allow individuals to reimburse their loans. ICICI is expanding to medium and small enterprise segment. The bank has observed robust growth both in corporate and retail advances, which has added to its profitability. International and rural banking are powerful growth engines for the bank. Foreign trade has also added to its fee income, as per experts. As per a research analyst's view at INCOS, who has recently done a report named "Indian retail banking sector analysis (2006)", rising consumer mortgages, growing investment by Indian corporations, and foreign acquisitions together with government's push for expanding credit in rural areas of India will help sustain growth in the fourth largest economy of Asia.
But now getting a loan in India is no more an easy task. Reserve bank of India has released strict directives for all the banks to check whether a housing loan is being sought for an authorized structure. Also, the responsibility to ensure that the construction is being carried out in accordance with the sanctioned building plan will fall with these banks. As a follow up of the orders from the high court, banks are advised to comply promptly with instructions in this regard without failing while considering the applications for loans. These given directives vary according to the type of application. In case of the loan application for buying constructed property, applicant will need to submit a declaration form to the bank stating that the construction of the built up property is going in process with the sanctioned plan. Likewise, in case of housing loan application for building construction, banks are required to get a copy of the sanctioned plan from the knowledgeable authority in the name of the person applying for such credit facility. Other legal formalities include a signed affidavit cum undertaking by the borrower according to which the borrower shall not violate the sanctioned plan.
But as said earlier, taking a loan is not a difficult task. However, before taking a loan, one must realize that the relationship with the bank will be for a longer period usually 15 to 20 years so one must ensure faith and integrity in bank. Apart from low rate of interest, the bank should also provide some value added services. The other thing is to look into is the property that is to be brought. Making sure that the builder has all sanctions and facility to build a good building is very important.
Aditya Jaiswal, advisor of home loans for NRIs, is an associated editor with the site: www.guide2homeloan.com. The site is an online portal to provide home loan advice on home loans in India including types of home loans in India, home loan interest rates in India provided by home loan providers in India.