The use of the latest technology can thus bring efficiency into the home loan process and substantially reduce the time taken to disburse home loans
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While one may get a personal loan approved and disbursed in a matter of minutes, it still takes anything between one to four weeks for the disbursal of a home loan. And it requires multiple branch visits and back-and-forth emails.
According to a 2021 report by PwC titled ‘Mapping the Indian retail lending landscape, the pandemic has accelerated the digital transformation journey for lenders across the board. Thus, though we have seen a lot of technological advancements in the lending space over the last few years, the home loan process has surprisingly remained slow. A lot of it has to do with the process itself- the large number of documents required, the physical verification of property, and the lengthy process of sanction and disbursal, all of which make the process time-consuming.
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If personal loans can be instant, why can’t home loans?
A personal loan is an unsecured loan, while a home loan is a secured one. If the borrower defaults on payments, the bank can sell the property and claim its dues. Also, while it is not mandatory to take life insurance when taking a home loan, it is a common practice, and it lets the bank secure the loan in case the borrower passes away in an unfortunate event. Yet a home loan consists of so many processes and involves countless follow-ups, while an unsecured personal loan can be disbursed in a matter of minutes.
Today, one can get a personal loan of anything between ₹5 lakhs to ₹20 lakhs disbursed to their account in minutes. Then why can’t it be done in the case of a loan where the collateral is available, unlike in personal loans where underwriting is based on pure credit profiling and a future assumption that the borrower will pay? To begin with, home loans of an amount of ₹20-25 lakh that falls in the affordable segment, can be made instantly. Even in the case of education loans of over ₹7.5 lakhs, there is a requirement for collateral, which is why the process is much faster.
Leveraging technology to make home loans instant
To understand how home loans can be made instantly, it is important to understand the different steps in the home loan process.
Verification of information provided by loan applicant: When you apply for a home loan, the bank will first scrutinize and verify all the information provided in the loan application. Based on that, the bank will evaluate your repayment capacity. This is a time-consuming process as it may require bank officials to visit you or vice versa. However, there is already a vast amount of consumer data that is already available within the banking system and with the credit bureaus. There is also substantial information available within the India Stack, which is a unified software platform that has given formal digital identification to all citizens of the country and which has Aadhaar as an integral component. Lenders should assimilate all such available data and map it to the financial records of the borrower, thus making it easy for them to verify a borrower’s credentials and check his or her repayment capacity. This can save a lot of time and also reduce or do away with in-person meetings.
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Collection of additional documents: Banks often ask borrowers to mail additional documents after the initial process. This email back and forth is also time-consuming. Instead, banks can have a specific set of documents that can be digitally uploaded from the borrower’s end.
Verification of the property: Before disbursing the loan, the bank will verify the property. This involves costs and processing time. In the case of an under-construction property, the bank will scrutinize the location of the project, the quality, and the stage of construction, and evaluate the property based on certain parameters. Certain technologies can be used to make the process more efficient. One is geotagging, which refers to adding geographical data to various media. Similarly, properties can also be mapped using geotagging and it can be used to track the construction status of properties. The verification can also happen over video apps, thus making the process faster and hassle-free.
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The use of the latest technology can thus bring efficiency into the home loan process and substantially reduce the time taken to disburse home loans, thus bringing it to par with personal loans. In fact, customers may even be willing to pay slightly higher interest on their home loans if they can provide faster and easier loan processing to their customers from the comfort of their homes or office. A hassle-free instant home loan will boost the real estate sector in India and make owning a home easier for Indians.
