Role Online loan aggregators can play in fulfilling Priority Sector Housing

Priority Sector Housing is any Loan to individuals up to ₹ 28 lakh in metropolitan centres (with population of ten lakh and above) and loans up to ₹ 20 lakh in other centres for purchase/construction of a dwelling unit per family provided the overall cost of the dwelling unit in the metropolitan centre and at other centres should not exceed ₹ 35 lakh and ₹ 25 lakh respectively.

Many consumers ask how much loan can I get ? How much down payment do I have to spare? The norms are divided into 3 categories:

  1. Upto Rs. 30 lacs - If a consumer purchases home loans up to Rs. 30 lakh otherwise known as priority sector loans the loan to total property value (including stamp duty in some banks) is 90%.

This makes more credit available to borrowers and reduce the down payment the first time homeowner has to pay from his own pocket.

LTV denotes how much of the property value a bank can lend to a borrower. A 90% LTV indicates that the buyer will have to shell out only 10% of the property value and the rest can be financed through banks.

For loans above Rs.30 lakh and up to Rs.75 lakh, the LTV stands at up to 80%. Loans above Rs.75 lakh will have an LTV of 75%. RBI's move comes in the wake of a government plan, called Housing for All, to build 20 million houses for the urban poor by 2022, which coincides with 75 years of independence. Affordability of low-cost housing for economically weaker sections and low-income groups is a major concern for the government.

India is on the verge of large-scale urbanization over the next few decades with over 10 million people getting added to the urban areas. However, the growth of housing is not percolated to the Low Income Group (LIG) households.

There is a requirement of development of about 11 crore houses with investments of over USD 2 trillion as per a recent KPMG report. It is also envisaged that majority of the housing demand would come from the low income group households (in both rural and urban areas) with income less than Rs. 2 lakh per annum.

Loanadda plays a crucial role in providing financial literacy and access to the low and middle income customers in the tier 2 and tier 3 towns for availing housing loans. Also its our observation that this segment has low delinquencies due to the emotional connect with the self occupied residential property.

Realising the huge need for housing finance among the LIG segment, private HFCs are now taking the lead in disbursing home loans to this segment and Loanadda is a major connector to eligible customers. HFCs are coming up with innovative credit norms to address the housing finance needs of this segment. Service offerings of these firms include comprehensive range of home loan products for salaried and self-employed customers besides loans for plot purchase or construction, home improvement loans and home extension loans. These firms also offer home loan products bundled with insurance to its customers to shield them from defaulting on their home loan EMIs due to unforeseen circumstances.