Options for Funding your Home Purchase in India

[Keya]

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.

 

[Assetmonk]

Some of the best ways to fund your home purchase in India include:
Bank Loan
One of the most popular financing choices for potential investors is a bank loan. Taking up a bank loan and repaying it in EMIs is a regular practice. One of the most significant benefits of purchasing a house with a loan is that the EMI value decreases as the asset value rises, giving the buyer a significant advantage. Furthermore, you may purchase real estate with only a 20% down payment and repay the loan over a generous 20-year term. Low-interest rates and processing costs, interest on daily lowering balances, interest concessions for women borrowers, no penalty for prepayment, and availability of home loans as an overdraft are some of the other popular advantages of house loans.
Borrowers, on the other hand, must be familiar with the many types of investments available in real estate finance. Choosing the wrong type of loan might have a negative impact on the investment's performance. Before approaching a lender, make sure you understand the requirements for each type of loan and completely research how the various options function. Conventional bank loans, hard money loans, and home equity loans are the three most common forms of investment property financing.

REITs are a type of real estate investment trust (REITs)
They were first established in India in 2014 and are organised similarly to mutual funds. These are real estate-related securities that are listed on a stock market and then traded. REITs are regarded as a lucrative investment choice and an excellent long-term investment with consistent profits.
One of the biggest advantages of REITs is that they allow you to invest in Grade A commercial real estate, which is a wonderful way to diversify your portfolio. Furthermore, as an Alternate Funding Mechanism (AIF),REITs offer liquidity to investors and are thus seen as a reliable investment option. REITs are a transparent investment option with the Securities and Exchange Board of India, providing consistent returns (SEBI).

Real Estate Investment on a Fractional Basis
Following its success in Europe and the United States, this alternative is progressively gaining traction in India. It is a novel type of commercial real estate investment that denotes the joint ownership of a single asset by numerous investors. A potential investor can sign up on the site and invest in any of the existing possibilities mentioned due to the large ticket amounts.
This concept opens up new avenues for investing in fractions of premium commercial buildings, allowing for higher monthly rental yields. Furthermore, because of the high ticket prices, fractional real estate investment has a lot of promise for retail investors who have restricted access to CRE. It also gives you the chance to invest in a variety of properties and places. As a result of the diversification, portfolio risks are reduced.