How Digital Platforms are Revolutionising the Face of Housing Finance?

The housing finance sector has been rapidly growing at a healthy pace. It has received further thrust as part of the Indian government’s ‘Housing for all’ initiative, which aims to meet the housing requirements of every section of society. This has put the spotlight on credit seekers and, at the same time, highlighted the challenges they face at various levels while trying to obtain Home Loans. Digitalisation and technological capabilities across the banking industry have thrown up effective solutions to mitigate these issues through new financial technologies, establishing a booming alternative credit ecosystem in India.   

Consequently, a wide array of financial products and services like instant digital lending has emerged, which consumers can easily access on their smartphones limiting the need to physically enter a lender’s office. In the long run, digital platforms aim to tender affordable credit with improved accessibility for wider outreach. 

Business Challenges That Confront the Housing Finance Sector

Both lenders and borrowers face challenges that give rise to bumpy rides in certain instances. Home Loan borrowers are usually overwhelmed by the long-drawn and cumbersome Home Loan procedures. The existing variations in housing loan products and processes may leave them baffled, especially if lenders are unable to provide timely assistance. 

The very nature of a housing loan implies that every Home Loan application is a potential lending risk and lenders have to run precautionary checks and measures to safeguard against defaults. In the process, they need to contend with exhaustive procedures and regulations, which may be the deciding factors between acceptance or rejection of Home Loan requests. 

How Digital Platforms Affect Home Loan Process?

Digital platforms have helped alleviate some of the current challenges. Here’s a look at the key areas where it has worked wonders: 

Online Accessibility

Digitalisation allows consumers to register on an online lending platform from their computers or smartphones, fill out an online Home Loan application, and upload the necessary documents – all in a matter of minutes. Unlike traditional lending processes that take several days to approve and sanction loans; digital lending platforms can reduce this time to a few minutes. Some lenders already offer instant online loan approvals in a matter of minutes.   

As their processes are largely driven by automated technologies, online lending entails lower operating costs as compared to loan approvals physically availed in a lender’s branch office. Digital platforms expand their reach across geographies and social segments at a fraction of the cost normally incurred through office set-ups. As a result, lending institutions can channelise these costs towards bigger investments like technological applications and better customer services. They can also extend the benefits of these savings to borrowers by lowering the housing loan interest rates, applicable processing fees and other additional charges.  

Additional Read: How to Get a Better Interest Rate on Your Home Loan 

Minimal Paperwork

When lenders process Home Loan applications, they spend considerable time evaluating a loan applicant’s eligibility and carrying out the necessary assessment of the property against which the loan is obtained. They also require a specific set of supporting documentation in this regard. If any paperwork is found amiss, it can delay the Home Loan approval process.  

Interestingly, digital lending platforms can assess a borrower’s credit profile and history within minutes based on the data provided by the customer. These platforms access various data points; and apply predictive models and algorithms to gain useful insights into the borrower’s creditworthiness, credit history and ability to repay the Home Loan.

Lenders conduct stringent verifications before sanctioning a house loan that require extensive documentation. Aadhar-based e-KYC has helped digital lending platforms reduce the turnaround time for processing loan applications by making the verification process paperless.  

Additional Read: Checklist of Documents Required for Home Loan 

Flexible Loan Processes

Eligible individuals can avail of a flexible credit line extending up to several lakhs through digital platforms. The level of convenience and competency is much higher than the physical lending modes. Accessing advanced predictive models powered by AI and machine learning to understand consumer behaviour is still at a developing stage. But it will play a greater role in helping lenders develop customised loan products for customers in the future.  

Technology has enhanced the loan borrowing procedure and is gradually shifting the entire customer journey online. Presently, digital platforms extend the following advantages to lenders: 

• Lenders can offer ‘spot loan offers’ and issue digital sanction letters for improved credit experience.  
• Some lenders partner with document wallets like Digi Locker, offering their customers easy access to essential documents such as interest certificates and account statements.
• Enabling customer sourcing, documentation, research, risk analysis and disbursement through automated and predictive technologies allows lenders to carry out data-driven eligibility checks, online authentication, verification of documents, video-based virtual discussions and subsequent onboarding.  
• Enhanced digital capability facilitates beneficial lender-borrower experiences and better decision-making.  
• Process efficiency reduces the cost of loans and time taken to market loan products; improves customer service and helps in higher customer retention.  

• Analytics helps lenders understand market requirements and concentrate on relevant sectors or target groups. 

How do Digital Platforms Make Life Easier for Customers? 

Customers can apply and avail of Home Loans at the click of a button, from the comfort of their homes without the hassle of physical branch visits or handling reams of paperwork. They can digitally sign loan proposals, submit documents electronically and get approvals based on income documents. They can even view loan accounts on the customer portal, generate and download documents and fulfil other service needs gaining more customer-friendly experiences.  

Availing a Home Loan may involve volumes of complicated paperwork, numerous approvals and sanctions. Digital lending reduces these complexities and caters to queries in the fastest possible time regardless of location constraints. Other advantages include saving time and money, maintaining flexibility in Home Loan terms; and easing the process of comparison and analysis of multiple loan options.  

Most lenders offer mobile apps and digital apps for the benefit of their Home Loan customers. Digital platforms have automated mundane tasks like service ticket allocation, pending document collection, timely reminders and notifications as additional service offerings. Further, the introduction of chatbots has reduced dependency on the back-office teams and proved helpful in responding to customer queries 24 hours a day. 

Additional Read: How to Check Your Bajaj Housing Finance Home Loan Status 

Summing Up

Technology has become a crucial element of the housing finance sector. It allows digital transactions and customised communication between borrowers and lenders. COVID-19 has been the catalyst in accelerating digital transformation across businesses and industries changing the face of company operations. In the near future, technology may further change the way people search, buy, lease or manage property. Progress of building projects could be tracked online through digital dashboards. Funding based on construction milestones may be monitored online bringing in transparency and accountability, thereby improving cost efficiency.