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Monday, September 23, 2019

HDFC, SBI or PNB Housing— Who leads Indian Home Loan Market?

A home is an asset that never depreciates and opens your doors to several financial benefits. It’s the dream of each one of us to buy a place which we can call our home. However, purchasing a home invariably means seeking financial assistance by applying for a Home Loan. With the aid of easy EMIs, low-interest rates, and convenient repayment tenure, getting a Home Loan has never been this easy.

Dynamics of Indian Home Loan Market

Home Loans have come a long way in India ever since HDFC became the first organised player in the Home Loan market way back in 1978. The total outstanding advances in the segment stands at a whopping Rs. 11.8 Lakh Crore today – up from 9 Lakh Crore in 2014. The market is largely been dominated by three players: HDFC, SBI (State Bank of India) and ICICI owing to the various innovations and concepts they have brought in from time to time.

While HDFC was the pioneer behind promoting the concept of housing finance in the country, ICICI was credited with bringing the idea of floating rates in the 2000s. SBI, on the other hand, brought in the fixed-cum-floating concept which also played a big hand in revolutionizing the Home Loan market in India.

Today, the housing credit in India is heavily fragmented – with over 80-plus players operating in it. With the population showing no signs of slowing down, suffice to say, the Home Loan market is going to keep on increasing in the country in the coming years. That said, let’s take a look at some of the main players operating in the segment and analyse their market share in India.

HDFC Home Loan

HDFC Bank is recognized as the largest private sector bank and was previously the market leader in the Home Loan segment in India. As of December 2018, HDFC Home Loans have managed to grab a market share of 15.7 percent in the Indian housing finance market.

SBI Home Loan

SBI is regarded as the biggest public sector bank in the country and a great institution if you’re looking to apply for a home loan. As of December 2018, SBI Home Loans have managed to grab a market share of 22.1 percent in the Indian housing finance market thus consolidating their position as the undisputed king in the housing finance sector.

PNB Housing Loan

Salaried and self-employed individuals looking to purchase, construct or renovate a home can consider to Punjab National Bank for procuring Home Loans. As of December 2018, PNB Housing Loan have managed to grab a market share of 3 percent in the Indian housing finance market.

But, before you begin the process to Apply for PNB Housing Loan, there are certain factors which you need to analyse and consider; after all, getting a home is a massive financial undertaking and you should cover all bases before pulling the trigger.

1. Research Loan Options

Do ensure that you do extensive research before applying for a Home Loan. There’s plenty of information available online which can help you narrow down on a suitable Home Loan lender.

2. Look at Affordability

Before applying for a Home Loan, do take some time to consider if you can afford the monthly EMIs as per your current and future cost of living. In that regard, ensure that you take into account all overhead expenses and have a contingency account as well so that you can cover any unforeseen emergencies. To that end, as a rule of thumb, you should ensure that your EMIs never exceed 45 percent of your total income.

3. Repayment Tenure

At the time of applying for a home loan, consider the repayment tenure best suited to your circumstances. Interest rates usually vary depending on the tenure chosen – for instance, shorter tenures have lower interest rates to encourage faster repayment. While opting for a long tenure might make sense, you should also realise that by doing so, you automatically have to pay higher outgo in the form of interest.

4. Be Aware of Foreclosure Norms

Always stay updated on the changing RBI norms such as foreclosure norms. If you have a sudden windfall or have the capacity to foreclose your Home Loan by repaying the outstanding amount, you can do so and avoid from paying additional interest.

5. Additional Charges

At the time of your Home Loan application, there are a bunch of administrative, processing or service charges that are levied by the banks – which is why you should ensure that you understand the charges and discuss them with your lender prior. In that light, do check with them to understand whether these charges are one-time or recurring so that you can plan your monthly finances accordingly.

The Bottom Line

These are exciting times especially if you’re a Home Loan borrower owing to the plethora of options at your disposal. Besides these main street lenders/ banks, you can also consider applying to Housing Finance Companies (HFCs) who have consolidated themselves with a market share to the tune of 37 per cent as of March 2017.

With a fourth cut in the repo rates which takes it down to 5.40 percent, surely there's no better time than now for prospective home-owners who are looking to invest in the real estate market.

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