Hello friends,
I am doing good, and I hope that you are having a good time with your near and dear ones.
The demand for home loans in India has increased in the last few years. This is a clear signal that more people are buying properties after the pandemic and the real estate market is low. The prices are down because of the pandemic but now things are getting better before that boom happens people are trying to buy the property. Home loan is one product by the banks where they earn good money by providing financial support to the people and property is mortgage by the bank.
There are two types of loans and these are known as secured and unsecured loans. Secured loans are the ones where banks have nothing as a security with them. If the borrower defaults then the bank has to bear the loss however bank has the right to try some ways for recovery. As per the RBI guidelines no bank is allowed to threaten the borrower and recovery should be happening as per the rules and relations. The second type is a secured loan where the bank has the ownership of the asset which can be a house or a vehicle. If the borrower does not pay the money the bank has the right to seize the asset and recover the money. An example of an unsecured loan is mostly a credit card or a personal loan where the bank provides financial support based on credit history and gets nothing at security.
Banks are not much bothered about the home loan for default. Till the time loan is not repaid the property remains in the custody of the bank but sometimes people are not able to pay the loan and in that case, the bank does the auction and sells off the property. If you look for newspapers on the weekend you will be able to see some of the advertisements by different banks for such auctions.
There are websites also where you can get this type of information. Almost every bank has some properties with them where the borrower did not pay the outstanding and the bank recovered the money through the auction. In India, banks mostly disburse 80% and in some cases, they go with 90% of financial support for real estate.
Currently, banks charge an interest rate of 8 to 9% in most cases but some banks charge beyond 9% for a home loan. When the COVID lockdown was going on that time the interest rate was around 7%. If we do the comparison between that interest rate and now what we have you will see a bigger jump on the interest rate.
Home loan is a long-term liability and even one percent makes a bigger difference in the repayment. The interest rate can go up or down depending upon what RBI issues the repo rate each quarter. Sometimes it is good for the customers and sometimes it is good for the bank because it is all dependent upon the RBI's discretion
