Options for Funding your Home Purchase in India



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The opening up of the Indian economy over two decades ago brought in a lot of choices hereto unknown to the common man. Today the average Indian consumer is spoilt for choice – both in terms of the products and the funding for those products. Therefore, it wouldn’t be any surprise when see the home-buying landscape also offers the Indian home buyers, plenty to pick and choose from. Although, the home-loans the most common, sought after and staple source of home funding, the market does offer plenty of other choices.

Home loans, as mentioned, are the most sought after and also the most viable of home funding vehicles. Both in urban and tier-2 cities, we find a large percentage of the populace depend on home loans to be the go-to option for funding the home purchase. There are a myriad interest rate structures and other sops that banks offer – which make them such an attractive proposition.

The sops include, deferred payment structures, easy down payment options, free foreclosure schemes and various others. Home buyers – of both affordable houses and luxury properties – have taken a lot of liking towards funding their homes via a home loan due to the flexibility and stability that they offer. The EMIs ensure that the financial outgo is distributed over a longer period of time.

Developers also find home loans to be a very viable option as they can tie-up with banks to allow their consumers attractive schemes and provide ready funding to offload their inventory. Home loans are typically categorized into fixed and floating interest loans. In case of the former the interest rate once fixed remains constant for the duration of the loan; whereas in the later the interest changes with the fluctuations in the prime lending rate offered by the reserve bank of India. Each of them have their own advantages & disadvantages – and a buyer must familiarise himself with the pros & cons before fixating on one.

However, there are also hybrid loan options which gives you the best of both. You can remain on a fixed interest rate for a specific time period and then move over to a floating regime, thereafter.

Banks also offer mortgage options, if you have an existing property that you wish you pledge to fund your new home. Herein, the constraint could be the value of your existing property – it may or may not suffice as collateral required.