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Housing Finance – Affordable Capital for Homes

Introduction

"Housing for All" is a major goal. Housing Finance Companies (HFCs) and Banks provide long-term capital to individuals to buy homes.

1. Players

  • HFCs: LIC Housing Finance, PNB Housing, HDFC Ltd (merged).
  • Banks: SBI (Market Leader).

2. Regulator

  • Regulated by RBI.
  • Supervised by National Housing Bank (NHB).

3. Loan to Value (LTV) Ratio

  • If house cost is ₹1 Crore, Bank can lend max ₹75-90 Lakhs depending on rules.
  • Buyer must put in the rest (Margin Money).
  • Ensures borrower has "Skin in the game".

4. Tax Benefits (Incentive to Borrow)

Govt encourages home buying via Income Tax Act:

  1. Sec 80C: Deduction on Principal repayment (Up to ₹1.5L).
  2. Sec 24(b): Deduction on Interest payment (Up to ₹2L for self-occupied).

Summary

  • LTV: Loan cannot be 100% of value.
  • Tenure: Very long (15-30 years).
  • Tax: Huge tax saving on EMI.

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