Home loan borrowers are today a young lot who plan their repayment tenures smartly, says Balaji Rao
The times are changing and it is evident from the conspicuous change in the type of borrowers that banks and HFIs are witnessing in the recent past. As per the information shared by Shamila, AGM, Canfin Homes Ltd., in the last two years, about 50 per cent of the home loan customers have been in the age group of 25-30 years and the percentage is increasing with every passing month. Even the realtors are seeing a significant increase in this type of buyers. Until about a decade ago the same was as low as 10 per cent. Resultant of a positive economic growth, increased literacy levels and changing demography, the shift from older age borrowers to young borrowers is quite understandable.
Many youngsters are now getting decent jobs with handsome salaries. They marry early, with both husband and wife earning, work in places other than their home town and aim to live in their own houses.
Cities, particularly Bangalore, seemed to have caught the fancy of the entire country with their affordable housing, enough breathing space, lots of job opportunities and a decent transportation network. People are serious about owning a house/flat and settling down permanently in such cities.
The financial calculation too favours purchasing and living in an own house rather than living in a rented house as rental rates have spiralled to a new high. It would be a better decision to pay an EMI of Rs.25,000 compared to paying a rent of Rs.15,000 p.m. which always will be an expense compared to getting tax benefits on housing loan repayments.
Ms. Shamila shared an interesting aspect about lending to young borrowers. The HFI does not mind offering these youngsters a loan tenure of 25 or even 30 years. The risk of lending to a borrower who is in this age group is more manageable than giving a 20-year loan to a person who is in his/her 40s.
What is even more surprising is that these young borrowers are making bulk bullet payments (ad hoc payments) once or twice during a particular year apart from the regular EMIs and thereby reducing their overall loan tenure. Ms. Shamila feels that she may not be surprised if the loans are repaid within the first 10 years rather than them continuing paying for the full loan tenure. This is good news for the entire fraternity comprising banks, HFIs and the real estate sector. The target customers are absolutely acceptable to all these entities and no wonder there is a surge in the number of flats being built and the lenders trying to entice the young crowd with innovative offers.