July 13, 2024

Housing Finance Development

It's Your Housing Finance Development

Importance of best practices and transparency in securing a better future of the industry

Housing finance in India: Importance of best practices and transparency in securing a better future of the industry

Representational image. News 18

With more and more people looking to purchase a house, the housing finance industry has shown steady progress over the years. Many structural and policy changes have characterized the industry growth, and the endeavour has been to move toward a more transparent system that secures the interests of all stakeholders. The implementation of the Real Estate (Regulation & Development) Act, 2016, as well as the digitization of land registries and market data, has contributed to this increase in accountability, especially in the case of the real estate market in India.

The efforts made to increase transparency and accountability

Accelerated Digitization

In India, the digitization of the industry, the availability of data about transaction processes, and the regulatory changes that have characterized the sector have all contributed to the rise in transparency scores, especially between 2020 and 2022. This has been further supplemented by increased institutional investment and the growing number of real estate investment trusts. Reports about the use of these funds, as well as information about the assets owned, have become more accessible due to the aforementioned digitization efforts and the effective functioning of regulatory bodies.

Additionally, India can augment its sustainability tracking infrastructure, which is imperative, considering the enormous amount of investment this segment attracts. These resources need to be utilized efficiently to help overcome the opaqueness that was previously a characteristic feature of the sector. Some steps in this direction are making green certifications mandatory and strictly enforcing the Energy Conservation Building Code (ECBC). These initiatives align with India’s resolve to achieve Net Zero emissions by 2070.

The implementation of clear guidelines

The housing finance industry in India has functioned arbitrarily for a long time since its establishment. The negative impact was discernible in the high rates of interest that institutions charged on home loans. With the entry of regulatory bodies like RBI and NHB, banks and financial institutions were mandated to make the process of fixing benchmark rates transparent. This benefitted borrowers greatly as capriciously decided interest rates could no longer exploit them.

Aiding financial institutions in policy formation

To help banks decide and make available information on their interest rates, the existing regulatory bodies introduced mandates to prompt banks to abide by external benchmarks in making decisions. These benchmarks include parameters like repo rate or the rate at which the central bank gives loans to these institutions in times of need. Therefore, the rates by banks are no longer haphazard and are linked to measurable and observable factors. It allows borrowers to be aware and keeps a check on the authority of the banks.

Avoiding unnecessary delays

Adhering to timelines and clear communication to the borrowers about the time taken to secure a loan is essential as it can help them make informed decisions depending on their needs. Many banks follow this practice, and in the case of unnecessary delays or in cases where wrong information is provided about timelines, customers can file a complaint with higher authorities.

Bottom line

The introduction of transparency and best practices in the housing and finance sector has benefitted everyone, including the financial institutions in the industry. Through the assurance of ethical practice, these institutions have been able to attract more investors. Besides, the entry of private players in the field has further motivated them to revamp practices to secure a customer base. Considering its growth and progress, we can safely say that the home financing sector has a bright future ahead.

The author is the founder and CEO of easiloan. Views are personal. 

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