One of life’s essential milestones is to own a house that you can call ‘Home.’ Whether or not you already own a house, or live in a rented property, and even as a form of investment – owning a piece of property brings its own sense of security and relief.
However, everyone can’t afford to pay up-front cash in total to purchase a property. So, what saves the day for homebuyers? Yes! You guessed it right – availing home loans.
While banks usually are your go-to option for a getting home loan, in some cases, they might be unable or unwilling to sanction the loan. What then? What viable options are left for you to buy your family home? Enters NBFCs – Non-Banking Financial Companies.
What is A Non-Banking Financial Company?
In simple terms, NBFCs are organizations that offer inventive financial solutions and accessible banking facilities, all without having to meet the legal status/category as that of a bank. Such institutions are listed and registered under the Indian Companies Act, 1956.
NBFCs primary function is to enable banking services such as:
- Loan advancements (Persona, Home And Auto Loans)
- Share acquisitions
- Credit facilities
- Retirement plans
Indian Economy: The Role of NBFCs
For those who have been excluded by banking institutions, NBFCs cater to their diverse financial needs and provide innovative solutions for backing new endeavours, thus assisting them towards growth.
NBFCs fulfils, or supplements a banking institution’s role in meeting the rising financial demands of the country, especially with the rapidly growing population. Likewise, NBFCs also include providing credit to small businesses and the unorganized sectors.
Although NBFCs do not function as banks, they are still bound to compliant towards the same set of rules and regulations as other banking institutions.
Considering the growing demand for purchasing a property by those with an average income, today, NBFCs have become one of the most critical tools for money lenders – in terms of real estate lending.
Real Estate Development: The Primary role of NBFCs
In India, NBFCs contribute to the real estate sector substantially. Whether be it attracting foreign investments, or increasing capital formation and resource mobilization, NBFCs are an integral tool. With NBFCs, your savings can turn into investments, which leads to more investments in the real estate industry.
The demand levels for real estate is going to be at its peak in the upcoming years. Consequently, property investments have the potential to provide you with much higher returns in the future.
Because NBFCs primary role is to lend financial backing to infrastructural projects, they mostly contribute to the real estate sector. In the last couple of years, infrastructural loans from NBFCs have been sought after l as opposed to the banking institutions.
Thus, NBFCs continue to give loans to borrowers who are looking for housing investments. So, if you too are interested in buying a property, NBFCs make for a better alternative than banks.
NBFCs Impact On Real Estate Investments
With restricted funding from banks that was reduced to 2%, as of March 2018, NBFCs accounted for 61% of commercial real estate borrowing/funding in India.
As stated by sources, there has been a rise in borrowing patterns, which has grown up to 50% in the financial year 2016 – 2018. Due to an increase in the population, there has been a soaring demand for infrastructure such as residential and commercial spaces.
What’s In Store For The Future?
The Reserve Bank of India (RBI) has facilitated multiple steps to improve the security and efficacy of NBFCs in the country. Subsequently, in 2018, the RBI issued the Information Technology Framework (ITF) had been issued for the NBFC – a framework that augments security, protection and efficacy to facilitate improved operations and deliver increased benefits to the consumers.
Undoubtedly, the NBFCs role in sustaining utilizations and capital formation in Micro, Small and Medium Enterprises (MSMEs) cannot be neglected or disregarded. Therefore, the Government of India has given a single-use, partial credit guarantee for up to 6 months to the public sector banks for buying high-rated assets with a value of INR 1 lakh crore from NBFCs – to deal with the increased pressure that NBFCs have been facing in India due to increased demand.
Remember, if you have a low Cibil score, then NBFCs make for a great alternative to banks. NBFCs might not be termed as banks, but they are just as reliable.
Jones Foundations Realty Projects Are Backed By NBFCs
At Jones Foundation, we take immense pride at what we do. Our objective is to help and support you to find your perfect family home and celebrate it with your loved ones and family.
We also understand that in today’s world, with increased inflation, buying a home might seem like a distant dream. So, we partner with leading financial institutions such as TATA Capital Housing Finance Limited, and ICICI Bank to bring you the best of properties and the ease of buying them.