Home loans are secured for buying a home or constructing or renovating one. These loans owe their popularity to low home loan interest rates, which makes loan repayment easy and fuss-free. 

However, with residential property prices breaking new records and touching new highs every day, it is unsurprising that many people find it difficult to afford a home even with a home loan. The Government of India aims to help such people through affordable housing finance or housing loan schemes. This article discusses some such schemes that are available to Indian citizens. 

Affordable Home Loan Options: Here’s What You Need to Know 

Pradhan Mantri Awas Yojana (PMAY) 

The Pradhan Mantri Awas Yojana aims to provide affordable housing to individuals belonging to low-income groups (LIG), middle-income groups (MIG), and economically weaker sections (EWS). The PMAY scheme can be divided into PMAY rural and PMAY urban. Depending on where one wants to buy a home, they can apply under the correct category. 

One of the key criteria to be considered eligible under PMAY is that the loan borrower must not own a pucca home anywhere in the country. Under PMAY, individuals can secure highly subsidized home loans at home loan interest rates as low as 6.5% for 20 years. PMAY is one of the best affordable housing schemes in India. The best part is it gives priority to senior citizens and differently-abled individuals.

Rajiv Awas Yojana 

The Rajiv Awas Yojana was introduced with the key objective of making India slum-free as well as ensuring that every citizen of India has access to basic shelter and social amenities. 

People from three different categories can apply for housing finance under the scheme. Under category A come individuals that live in urban areas with a population exceeding 5 Lakh. These individuals can avail of financial aid up to Rs.5 Lakh to build a home. Individuals who live in urban areas with a population below 5 Lakh fall under Category B and can secure financial aid up to Rs.4 Lakh. Under Category C come people in special-category states and the Northeastern states of the country. People under Category C can receive financial aid up to Rs.5 Lakh.

Other than these two schemes, several other schemes offer financial aid and home loans at highly subsidized interest rates to individuals belonging to specific categories. For instance, the DDA Housing Scheme, the Tamil Naidu Housing Scheme, the MHADA Lottery Scheme, and the NTA Housing Scheme, all aim to make housing affordable to all. However, even if you are not eligible for a housing loan under one of these categories, do not worry. The next section of this article discusses simple tips on how to secure affordable home loans from financial institutions.

Tips on How to Secure an Affordable Home Loan from a Bank or NBFC

1. Securing an affordable home loan becomes easy when the loan applicant has a CIBIL score above 750 as such a CIBIL score is indicative of excellent repayment capacity and a healthy and responsible attitude towards loan repayment. With a CIBIL score above 750, one’s ability to negotiate for a low home loan interest rate loan also increases, alongside their ability to demand a high loan sanction and long repayment tenor. 
2. Home loan applicants must maintain a stable income and job and a debt-to-income ratio below 40%. While a stable income and job help individuals repay loans on time and without missing EMIs, a low debt-to-income ratio enhances a lender’s confidence in a borrower’s ability to repay loans comfortably, thereby convincing them to extend the best loan offer to the loan borrower. 
3. Home loans are secured loans. The property bought with the loan money provides security for the loan. Therefore, the quality of the collateral matters. Investing in a high-value property will automatically enhance your chances of securing an affordable home loan. However, if you are not ready for a big financial commitment, it is best to invest in something that goes well with your budget and pocket. 
4. Lastly, lenders offer their best loan deals to young individuals who have a lot of working years ahead of them. If you fall within the higher age bracket, you can consider adding a young co-borrower to increase your chances of getting approved for a low home loan interest rate loan.