Smaller Towns Driving Growth in Home Loan Market

The coronavirus pandemic caused many people to lose their jobs, making them accumulate huge debts in the process. Consequently, the real estate industry suffered heavily because the demand for properties reduced significantly.

As people recover from the pandemic’s effects, demand for properties has shot up. However, more people are buying properties in smaller towns. By taking loans from banks and housing finance companies, borrowers take advantage of low-interest rates, long repayment tenor, and many more benefits.

This diversion from metropolitan areas to small towns is welcome news to the real estate market. According to a report by CRIF High Mark, an RBI-approved credit bureau, smaller towns have recorded a higher annual growth rate for home loans when compared to metropolitan areas. So, if you are looking to buy a house or invest in property development, taking a home loan is a great way to begin.

Now, let’s walk through the various aspects of a home loan.

What is a Home Loan?

A home loan is a financing option that lets you obtain a large amount of money from a housing finance company. You can use the funds for a house purchase, renovation, construction, or even to invest in the real estate market.

When you obtain a loan amount, the lender charges you a certain amount as interest. The real estate industry suffered greatly due to the coronavirus pandemic and therefore, the Reserve Bank of India, in its efforts to give a push to the real estate industry has kept the repo rate unchanged at 4% right now. This, in turn, has allowed lenders to offer home loans at low interest rates. People in small towns of India are using the current situation and the low interest rates to their best advantage and becoming homeowners.

How a Home Loan Works in India

Below is a list of stages that you must pass through to obtain a home loan in India.

The Application Phase 

Upon deciding on the property you want to acquire, complete the application form available on your selected lender’s website. Submit the required documents when prompted. However, note that not all documents can be submitted online.

The Payout Phase

After verifying your documents, the lender disburses the approved amount. The lender retains custody of the property documents for the loan tenor.

The Repayment Phase 

Upon receiving the loan, repayment begins the month after. The EMIs comprise the principal amount and the interest charged. You must pay your EMIs until your loan tenor ends.

The Loan Closure Phase

Upon repaying the loan in full, the lender closes the account. However, ensure that you receive a No Objection Certificate (NOC) from the lender which declares you debt-free. Also, this is the part when you regain custody of your documents, particularly the property papers.

How to Close a Home Loan Before the Tenor Ends

There’s a way to complete the repayment even if you have many years left on the agreed tenor. If you have the means, we recommend that you make a part-prepayment or opt for foreclosure.

With a part-prepayment, you lessen the outstanding loan amount by far. A foreclosure lets you close the loan account early through a lump sum payment. While some lenders require that you must pay certain charges to use these facilities, many lenders do not charge anything to extend this facility.

Two Benefits of a Home Loan

With a vast range of benefits to enjoy, now’s the perfect time to take a home loan. Here are two benefits of a home loan.

Contact-Free Loans

These days, most lenders understand that people, especially those who are vulnerable, want to be able to avail of a loan while avoiding all kinds of physical contact. Therefore, lenders have started offering contact-free loans, a feature that allows you to complete the home loan application process online. Simply fill out the application form and supply the necessary information when prompted. At some point, we may require you to submit some documents in person. This is a requirement that signals the end of the application formalities.

Sizeable Loan Amount

If you possess a good credit score, your chances of getting a loan amount of Rs.5/crores or even higher are high.

Switch to a Smaller Town with a Home Loan Now

With the pandemic wreaking havoc on many industries, more and more people have started moving back to their hometowns. The work-from-home culture is supporting this trend. If you are planning to move back to your home town, now is the best time to avail of a loan and become a property owner in the city where you grew up.


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