Women home loan borrowers usually have a better credit history and are profiled as more trustworthy by the lenders
Home buying has been traditionally a men-only affair in India, and women's participation in financial matters has been the bare minimum all this while. However, in the last two decades or so, with more women becoming part of the workforce and the ensuing uptick in their financial awareness, they have started establishing a path of their own.
This has made women proactively participate in achieving major life milestones such as buying a house for several reasons. Firstly, to have an independent place of their own, at times also the motivation there is to have a home close to their workplace. Secondly, women are now purchasing a property to diversify their investment portfolio, as part of long-term financial planning.
As per the latest consumer survey by ANAROCK-LIC Housing Finance, women are the major contributors to the increase in end-users of the Indian housing sector. The data indicate that 77 per cent of women home seekers are looking to buy property for end-use, while the rest are looking at the same as an investment.
Contrarily, 38 per cent of men buy houses for investment purposes whereas 62 per cent of men are looking to buy property for end-use. These facts indicate the potential to incentivize the women with more benefits to grow the housing segment, from the perspective of the government's larger goal of 'Housing for All'.
Here are a few existing features where women benefit from availing of a loan to buy their house in India.
Relatively Lower Interest Rate
Women home loan borrowers usually have a better credit history and are profiled as more trustworthy by the lenders. This is the reason that women enjoy the benefit of a discounted interest rate on various lending products, including a home loan.
Since a home loan is a big amount, a concession on the interest rate can be extremely helpful and can make it quite easy for them to afford and repay on time. The interest rate may be lower by 0.05 to 0.1 per cent but this can dramatically impact the EMIs amount and make loan repayment easier for the borrower.
For instance, if a borrower takes a home loan of Rs 1 crore from a financial institution for 20 years. The interest rate offered to the male borrowers is 7.0 per cent whereas the interest rate offered to female borrowers is 6.9 per cent. In this scenario, the total interest payable is Rs 86.1 lakh whereas the interest outflow for women is Rs 84.6 crore. As a result, the savings in interest outflow for women borrowers is Rs 1.5 lakh.
Reduced Stamp Duty and Tax Deductions
Most of the state governments have mandated to reduce the stamp duty by 1 per cent to 2 [er cent for the women homeowners, which is a considerable saving amount in the total cost of the property. This step has further incentivized women to buy homes in India.
For instance, in NCR women are offered a reduction of 2 per cent in stamp duty and Rajasthan offers a 1 per cent reduction. This is irrespective of sole or joint ownership. So, on a property worth Rs 60 lakh, women can save up to Rs 60,000 to 1,20,000. Along with the ease of stamp duties, women also have the opportunity to claim tax benefits Rs 1.5 lakh on the principal amount under Section 80C and Rs 2 lakh on the interest repayment.
If it is a joint home loan both husband and wife can claim the benefit which is a combined deduction of Rs 3 lakh on the principal amount and Rs 4 lakh on the interest component.
Access to higher loan amount & extended tenure
Another benefit of the housing loan for women is the eligibility to get a higher amount and longer tenure. Typically, to attract women borrowers, lenders increase the home loan eligibility criteria such as offering Rs 30 lakh to Rs 3.5 crore loan amount for a longer repayment tenure of up to 25 years. These additional benefits of easing eligibility criteria are a significant advantage for women.
The Game Changer - PMAY Scheme
After the government initiative of ‘Housing for All’, the benefits offered to women applying for affordable housing loans have increased. The government has made it mandatory for the woman to avail of an interest subsidy of up to Rs 2.67 lakh.
With the help of this scheme, women are given preference and can apply for housing loans without facing any discrimination. Women of all ages, classes, and marital status get financial freedom which takes them one step towards equality.
While numerous benefits are offered to women, the only thing to keep in mind is to choose a lender that offers competitive interest rates.
The author is Co-founder and CEO, BASIC Home Loan
DISCLAIMER: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.