OPTING FOR THE RIGHT HOUSING LOAN FINANCIER

by Vpalkar CA V Paalkar & Co.

The dream of every person on this earth would be to own a house in his lifetime. with so many financial institutions around, getting a housing loan has become very easy and in fact, the aspirant thinks it is a boon. his desire to construct a house drives him crazy to the extent that he may blindly sign any document to get the loan even without reading the loan document. Seeing the present trend, it is quite clear that banks and financial institutions are ready and more interested to provide housing loans. a notable fact here is that there is no prescribed norm or procedure of either RBI or Indian Bankers Association as far as housing loans are concerned except timely cautions to the banks in respect of overexposure to the housing loan and interest rates. Each bank has its own type of documents related to housing loans and many times, the applicant is kept in dark about the documents required and the procedures followed for the purpose of housing loans. The Financial Institutions make the borrower submit himself and give him no choice other than to accede to its terms and conditions. On many occasions, the applicant is made to sign the documents on the blank papers and also on blank cheques which is highly irregular and it is also not advisable. There is a meteoric growth in the housing and building construction sector and one of the main reasons is the easy availability of housing finance to all income groups.

MAIN CATEGORIES OF HOUSING FINANCE

Housing Finance Companies, old scheduled banks, and New Generation banks form the three main categories of housing finance. Though housing finance companies are also in the fray, the competition between the Old Scheduled banks and new Generation banks is rather stiff and both of them have their own positive and negative aspects.

OLD SCHEDULED BANKS

All the nationalized banks and private scheduled commercial banks which are rather old can be categorized under the above head. The process to sanction the loan takes a lot of time. But the advantage in these banks is the transparency factor where the transactions are lucid. Original documents need to be deposited in the bank once the loan is cleared.

NEW GENERATION BANKS:

There is a radical change in the functioning of the New Generation Banks when compared with old scheduled commercial banks. They are not very particular about the title or the valuation of the property, and the loan is released irrespective of the registration value of the property. The major disadvantage while dealing with these banks are it is next to impossible to get all the details of other charges imposed by the bank as in many cases they are handed over for outsourcing. There would be a long wait to get back the original documents despite clearing the complete loan amount as the documents will be preserved in some other metro city.