Home Mortgage Insurance

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The home mortgage insurance industry of India is one of the most matured industry under the mortgage sector of India. The home mortgage insurance is a special type of loan borrowing instrument. This special type of instrument facilitates borrowing of a home loan against any valid insurance. In other words, the mortgage facilitator provides the loan against a collateral security, which is an insurance in this case. Traditionally, the insurance facilitator and the loan facilitator are the one and same entity. Generally, in this type of home mortgage insurance product the amount of home loan alloted is half of the insurance quantum.

The borrower of the home mortgage insurance product pays equal installments for both, the insurance and the house loan till the maturity term of the insurance is attained. The maximum term of maturity allocated is of 20 years. The term varies with some mutually agreeable pre-determined parameters and conditions. This is the most popular type of mortgage insurance products in India.

Presently, the mortgage financing sector in India is witnessing steady growth and the size of the mortgage loan business in India is estimated to be US $ 18 billion industry. Huge real estate requirements and its subsequent development has fueled its growth. The prominent market leaders in organized Indian mortgage sector are housing finance companies, like LIC Housing Finance, HDFC, ICICI Home Finance etc. The estimated size of the organized mortgage industry in India account only for 25% of the total housing investment in India but commercial banks both National and Foreign Banks along with Cooperative banks and other non-banking financial companies are registering stupendous growth. The home mortgage insurance product has been the main growth driver for the commercial mortgage financing business in India and it is consistently registering 20-50 % growth on year-on-year basis, from the year 2000 onwards.

But the main bottleneck for the growth of this industry have been its low penetration capability. The home mortgage insurance product is confined to urban India and the low income group communities are either still ignorant or skeptical about its advantage. The other, bottlenecks that are hampering smooth growth of this industry are as follows -

  • Ignorance amongst masses
  • Poor accessibility
  • Lengthy processing time
  • Elaborate documentation
The housing investment sector of India has grown steadily over the past years as the proportion of outstanding housing loans as percentage of GDP increased from 3.4 % in 2001 to 7.25 % by the end of the financial year 2005. The prevailing trend of growth of the Indian home mortgage insurance market looks rosy. The housing finance gives a measure of the socio–economic status of people and thus it is regarded as a critical sector in terms of policy initiatives and interventions. But this never gives the measure of the actual size of the property mortgage industry of India. The financial allocations for mortgage industry in the last 5 Year Plan and fiscal measures related to housing and other properties has been taken and implemented successfully. The present 5 Year Plan also stresses for the overall development of the housing finance industry. Further, revamping of land laws, rental laws, fast mutation and registration process along with setting up of credit rating organization and modern mortgage insurance products has been suggested to help India in realizing its housing dream.

Last Updated on 5/26/2011