Home loans: Problems young Indians face

Harsh Roongta, CEO, Apnapaisa.com, throws light on the frustrations faced by India's young working population when they try to avail of home loans to buy a house in their city of birth even as they work out of another city.

Recently I spoke to a young friend of mine, Ashish Roy, 26, who works with an MNC manufacturing soaps, detergents, shampoos etc in Mumbai and who wanted to a buy a flat in Kolkata. He wanted to use my expertise on home loans to suggest solution to a problem he was facing in getting a loan.

He had approached a bank in Kolkata who said they would have given him the loan as both the property and his income papers were in order, but they asked him to visit their branch in Mumbai to get a loan as he was working in Mumbai.

When he came back to Mumbai after finalising the property in Kolkata, he approached the branch of the same bank only to be informed to visit a branch in Kolkata as the property was in Kolkata and they needed to value the property before giving the loan.

My friend had already paid Rs 51,000 as the booking amount to the property developer and if he were unable to book the flat, the developer would return back only 50 per cent of the booking amount (after negotiations as the developer was not ready to return a penny out of it).

Tensed, with all these issues, he called up asking me: Is India really one nation? The property was ready-to-move-in type with clear title documents and his loan eligibility was coming around to more than Rs 20 lakh (he needed only Rs 14 lakh to buy the house).

I decided to do some research on the same as the number of people moving to other cities for work has been increasing significantly and this may be a common problem faced by quite a few of them who either have plans of relocating or buying a property for their parents in their 'home city'.

We did a round of mystery shopping as well as spoke to the major home loan players. Here is what we found.

Disclosure: Most of the banks mentioned in the article are advertisers on Apnapaisa.

Officially each of the players said that such loans are no problems as they have a single common system across the country. However the situation on the ground was a little different.

From among the lenders we spoke to as mystery shoppers only HDFC and ICICI followed up on our initial call (we had dangled the bait of Rs 70 lakh as home loan amount we needed).

Even the official we spoke to in a SBI branch assured us that they would be able to do the transaction subject to their normal credit and operational checks.

The other two private sector banks and the one foreign bank that we spoke to (or visited) as mystery customers either told us that they could not do such a deal or did not respond back after taking down the initial details. 

We already knew a few DSA's (who are our clients as advertisers on our site) and we thought of getting this answered from them also. We spoke to a large DSA based out of Mumbai who serviced many banks. His feedback corroborated our own findings on mystery shopping.

Another DSA we spoke to in Mumbai (who did not work with either HDFC or ICICI Bank) said he would be able to get the transaction done provided the project in Kolkatta was pre-approved by any of the banks he worked for.

I also did a bit of informal talking with the private sector banks that had turned down (or did not show much interest in) our mystery shopper. What came out was that none of them had an effective loan origination system across the country and unless the loan amount was big enough the amount of effort required to co-ordinate with another city was just not justified.

Each office is driven by its own KRAs (Key rating areas) and as legal checking work done for another office was not counted as part of their KRAs this clearly did not enjoy any priority.

What it boiled down to was that a loan that was clearly falling within their credit and legal norms of the bank was being given up simply because of the mismatch of KRAs between the two branch offices. Of course for a determined customer this would still be possible but it might take a lot more time than usual.

The only saving grace to come out of this story was that at least for a few lenders India was a 'single' country.

Amen.