By difference of 15% is 15 lakhs (USD 23,505)

By understanding
the basic process involved in loan sanctioning we now look into the problems
associated with banks in handling the home loans.

 

     
I.        
The
Home Loans application/sanction procedure is lengthy & Tiresome,

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It
takes in an average between 45 – 60days to get a loan sanctioned. 1

   
II.        
No
Transparency in Reasons for Rejecting Home Loan Application. Prolonged Delay in
Taking Sanction Decision. Non-Refund of Processing Fee.2

  III.        
Failing
to communicate Change in the terms & conditions especially with respect to
Interest Rates changes, this is the reason why MCLR was introduced removing the
base rate system.26

  IV.        
A
home loan often requires payment of various fees, such as loan origination or
processing charges, administrative charges, documentation, late payment,
changing the loan tenure, switching to different loan package during the loan
tenure, restructuring of loan, changing from fixed to floating interest rate
loan and vice versa, legal fee, technical inspection fee, recurring annual
service fee, document retrieval charges and pre-payment charges, if someone
wants to prepay the loan. Many of these fees are negotiable / can be waived
also.3

   
V.        
Despite
60 years of automation improvements, the biggest problem mortgage companies
report with respect to their operations is incomplete or problematic loan
documentation. 24

  VI.        
Misleading
Applicant’s Home Loan Eligibility: The amount that Banks don’t give becomes
applicant own contribution for a home. Naturally, All Home Loan Applicant want
the highest Loan amount. Loan Agents then promise up to 90% of property cost
& and the sanctioned amount is actually upto 80% from most banks. The
difference of 15% is 15 lakhs (USD 23,505) for 1 Crore (USD 156,700) house. It
is difficult for most applicants to gather lakhs of rupees in a short time.26

 

From 1.2 we
understood why home loan has been the most important sector for the retail
credit market, 1.3 explains the process, the borrower should go through banks
to get his loan approved, 1.4 describes the series of problems a borrower faces
when he is under the process.

1.2.5 Housing loan Market size

 

As per ICRA’s estimates,
the total housing credit outstanding in India as on March 31, 2016 was around Rs.12.5
trillion (USD 188 Billion) as against Rs.10.5 trillion (USD172 Billion) as on
March 31, 2015, indicating an annualized growth of 19% in FY16. The housing
credit growth was supported by disbursements on construction-

1 Julie
Ryan Evans in Realtor. July 2017

2 Bank Bazaar, Common
issues faced by Home loan borrowers, 2013

3 Souvik
Ghosh, Housing Finance in India and Appraisal Process of  Home Loans with Specific Reference to Indian
Overseas Bank, Issue 8 August 2014

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