Types of Mortgage

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The types of mortgage that are accepted in the Indian mortgage industry for the facilitation of mortgage loan are varied. Until recently, the Indian mortgage market was under the unorganized sector. The Government of India liberal economic policy in the late 1990s the facilitated the entry of foreign institutional investors (FIIs) and foreign direct investment (FII) in the Indian market. The Indian markets which were previously closed to such investments registered tremendous economical growth across all industry sectors.

In the last 15 years, the growth of the manufacturing industry in India propelled the growth of infrastructure industry in India. Furthermore, with the growth of infrastructure industry in India, the Indian mortgage loan industry witnessed tremendous growth. Today, the organized mortgage loan sector of India is registering astronomical growth and it is estimated to be US$ 18 billion industry. The Indian mortgage loan industry is consistently registering 20-50 % growth on a year-on-year basis, from the year 2000 onwards.

Huge real estate requirements in India and their subsequent development have fueled its growth. The mortgage industry of India could break open from its age old image of being housing mortgage facilitator only. Today, the types of mortgage that are being accepted as collateral are varied and not confined to residential property only. The types of mortgage accepted as collateral security for facilitating mortgage loans in India are as follows -
  • Amusement parks
  • Bowling centers
  • Casinos
  • Auto care centers
  • Auto dealerships
  • Car washes
  • Parking garage
  • Truck terminal
  • Conveniences stores
  • Distribution centers
  • Fitness centers
  • Franchises
  • Funeral homes
  • Gas stations
  • Golf courses
  • Malls
  • Retail (anchored, single tenant, unanchored)
  • Mobile home arks
  • Movie theaters
  • Resort
  • Restaurants
  • Hotels
  • Motels
  • Hospitals
  • Medical clinics
  • Medical offices
  • Nursing homes
  • Rehabilitation facilities
  • Skilled nursing facility
  • Special purpose property
  • Child care centers
  • Independent living facilities
  • Mixed use properties
  • Single family
  • Offices (multi-tenant, single tenant)
  • Warehouse
  • Industrial parks
  • Industrial buildings
  • Land developments
  • Mini warehouses
  • Office buildings
  • Outlet centers
  • Educational institutions
  • Training institutions
The following types of rates are prevalent in the Indian mortgage market -
  • Fixed Mortgage Rate - in this case the rate of interest remains fixed throughout the loan term. The mortgage rates do not vary according to market conditions. In other words, the rate of interest is pre-fixed during the process of borrowing and it generally varies between 12.5% and 25 %.

  • Flexible Mortgage Rate - is one in which the interest rate varies according to market movements. This type of interest rate is called 'adjusting' or 'floating' rates. The risk factor is high in this type of interest rates.
Some of the well-known mortgage-financing companies offering various types of mortgage in India are as follows -
  • LIC Housing Finance
  • HDFC
  • ICICI Home Finance
  • SBI Housing Finance
  • UCO Bank
  • State Bank of India
  • State Bank of Mysore
  • Allahabad Bank
  • United Bank of India
  • United Commercial Bank of India
  • Bank of Baroda
  • Kotak Mahindra Bank
  • Citi Bank
  • HSBC
  • Standard Chartered Bank
Life Insurance Corporation of India enjoys complete market leadership in this sector. The private financial institutions like commercial banks, cooperative banks, and other non-banking financial companies are also registering steady growth since 2000. The estimated size of the organized mortgage industry in India account only for 25% of the total housing investment in India which is further increasing on year-on -year basis. Bottlenecks like low penetration capability, ignorance amongst masses, poor accessibility, lengthy processing time, and elaborate documentation are hampering smooth growth of this industry in India. The government of India's 5 Year Plan stresses for the overall development of the housing finance industry. Recently, the government has accepted suggestions for the revamping of land laws, rental laws, fast mutation, and registration process along with setting up of credit rating organization and modern mortgage insurance products for the fast-growing mortgage market of India. For further information on types of mortgage please visit the following sites:

Last Updated on 5/26/2011