Housing finance companies in India come under the regulation aegis of the RBI as per the Finance (No. 2) Act, 2019 (23 of 2019) that amended the National Housing Bank Act, 1987. And these institutions have a major share in housing loans sanctioned and disbursed in the country. For the FY of the total credit offtake, credit from banks and NBFC and HFCs was the ratio of 70:30.
This implies that these housing finance companies also serve a great deal in supplying credit at large in India.
Now how these companies' function or what is their scope of work includes, here is detailed the same:
Scope of work Of HFCs
Accordingly, 'Housing Finance" or "providing finance for housing" means:
Financing, for purchase/ construction/ reconstruction/ renovation/ repairs of residential dwelling units, which includes:
a. Loans to individuals or group of individuals including co-operative societies for construction/ purchase of new dwelling units.
b. Loans to individuals for purchase of old dwelling units.
c. Loans to individuals for purchasing old/ new dwelling units by mortgaging existing dwelling units.
d. Loans to individuals for purchase of plots for construction of residential dwelling units provided a declaration is obtained from the borrower that he intends to construct a house on the plot within a period of three years from the date of availing of the loan.
e. Loans to individuals for renovation/ reconstruction of existing dwelling units.
f. Lending to public agencies including state housing boards for construction of residential dwelling units.
g. Loans to corporates/ Government agencies (through loans for employee housing).
h. Loans for construction of educational, health, social, cultural or other institutions/centres, which are part of housing project in the same complex and which are necessary for the development of settlements or townships;
i. Loans for construction of houses and related infrastructure within the same area, meant for improving the conditions in slum areas for which credit may be extended directly to the slum-dwellers on the guarantee of the Government, or indirectly to them through the State Governments;
j. Loans given for slum improvement schemes to be implemented by Slum Clearance Boards and other public agencies;
k. Lending to builders for construction of residential dwelling units.
All other loans including those given for furnishing dwelling units, loans given against mortgage of property for any purpose other than buying/ construction of a new dwelling unit/s or renovation of the existing dwelling unit/s, will be treated as non-housing loans.
Note: This is taken from RBI site.
HFCs In India
Now India has as many as 100 HFCs as per paisabazaar portal including Can Fin Homes, HDFC, Dewan Housing Finance, Aadhaar Housing Finance Limited, GIC Housing Finance, Gruh Finance, Cent Bank Home Finance, Housing and Urban Development Corporation Ltd., ICICI Home Finance, Ind Bank Housing, LIC Housing Finance, Manipal Housing Finance, PNB Housing Finance, Repco Home Finance, Sundaram BNP Paribas, L&T Housing Finance among others.
Top 10 HFCs offering best home loan rate
|HFC||Interest rate on home loan||Processing Fee|
|HDFC||6.9% to 8.2%||As applicable|
|LIC Housing Finance||Starting 6.9% for up to Rs. 50 lakh||As applicable|
|Bajaj Housing Finance||6.90%||As applicable|
|PNB Housing Finance||7.50%||Up to 1% of loan amount i.e. minimum Rs. 10000|
|Tata Capital Housing Finance||7.50%||0.5% of the loan amount onwards and GST|
|Can Fin Homes||7.75-9.75%|
|DHFL||8.75%||0.5-1% of loan amount|
|Indiabulls Housing Finance||8.99%||Up to 2% of loan amount|
|Aditya Birla Housing Finance||9.00%||Up to 1% of loan amount|
|GIC Housing Finance||9.1-12.5%|
Note the interest rate is dependent on the loan ticket size as well as credit score of the borrower. Those with low credit score end up getting higher rates of interest which can go as high as 9.5% even in the current interest rate regime when interest rate have hit historic lows. Even when some of the companies like the PNB Housing Finance are extending festive season offers i.e. offering attractive rate offers for a period of up to January 2021.
Also, as home loan is a long-term commitment proper study of the rates together with other aspects is quiet a crucial exercise before one opts for the home loan financier.