Problems of housing finance institutions in tiurpati: A comparative study

Housing fiancé covers wide spectrum of activities. Personal savings contribute only a portion of the cost of housing. The balance has to be necessarily provided by long term loans, with repayment schedule ranging from 10 to 20 years. The entire investment in housing gets impounded in the form of immovable physical asset, without generating any return except when a house is let out. Even when the house is let out, the rent received thereon does not give sufficient return on investment made. Usually, rent cannot match even 50 percent of the interest burden on the housing investment. Hence, the saying ‘fools build houses and wise men live in them'. So, repayment of house loan is usually made out of regular source of income like salary, which is the main source for meeting family expenses on food, education and other expenses. This necessitates housing loan to be repaid in small installments spread over longer period of times based on affordability. Interest forms major portion of regular installments of housing loans. In the absence of sufficient savings, any house builder is compelled to raise long term loans to complete the construction programme. The borrowers face various problems with HFIs in respect of sanctioning, disbursing and recovering the loans. The quantum of housing loans sanctioned has been two folds higher in LICHFL than in HDFC. The expenditure on rent, legal expenses and miscellaneous expenses are rather very high in HDFC compared to LICHFL. But, the recovery percentage in HDFC has been relatively better than LICHFL.