Are You Looking to Buy a House in a Tier 3 City?

Did you know that the 2013 Planning Commission report said that by 2031, 30%-40% of the urban population will be living in small or medium-sized towns? The rapid development spreading to tier 2 and tier 3 cities has led to a spike in real estate prices. People living in tier-3 cities in India may still find it difficult to afford a house if they fall in the middle or low income group. To solve their specific needs, specialized products are needed, such as a rural housing loan.

Qualities of Home Loan for the Rural Populace

• Target Customer Base: This type of financing is suitable for people residing away from major urban centers. The customers are generally agriculturists, blue collar workers, agriculture related workers, self-employed people and salaried individuals from remote areas. 
• Loan Amount: Since the need for financing is associated with real estate purchase in tier-3 cities, the amount offered as loan is governed by the prices applicable to the area. Since the market rates of properties are much lower here than the in tier 1 and 2 cities, the amount extended as loan is also not very high. Generally, rural housing loans range from Rs 50,000 to Rs 10 lakhs. This figure is within the affordability range of a majority of the people in the area.
• Usage: The amount raised through a rural housing loan can be used for a variety of purposes. The borrower is not only free to utilize the money for purchasing a property in the area but can get other important things done, like reconstructing, repairing and home improvement.
• Loan to Value Ratio: The value you receive on raising these loans generally hover around 70% to 80%, depending on whether the house is fully ready for purchase or whether the loan is obtained for the completion of construction undertaken for home improvement.
• Eligibility: Different banks require different types of checks before they agree to grant a loan to an individual. The criteria may be judged according to the gross annual income of the household (which is usually around Rs 1,20,000), surrogate income proofs and inquires carried out by the lending institution on the field.

Rural housing loans are created specifically to solve the problems of a specific target customer base. This type of product will help people from small towns acquire valuable long term assets, without having to shell out a majority of their savings or being burdened by an unaffordable repayment amount.