Home Loan for Women at Concessional Interest Rates reads one of the hoardings near my house. My wife called one of her friends and told her about the Home Loan for Women. Her friend is a single working woman and looking for a flat in Noida. I knew that bank will not lend to a single women borrower at any cost. As i was not in a mood to dampen the spirit and enthusiasm of 2 friends, therefore, i was a mute spectator to this discussion. After few weeks, her friend called me and told me that bank is not approving her so-called “Home Loan for Women“. The bank was demanding either a co-applicant or guarantor for her home loan. Finally, she dropped the idea of purchasing a house. This whole incident made me wonder Is Home Loan for Women truly for Women Borrowers?
I can understand if a bank refuses to lend to a housewife or non-working women as there is no source of income. The refusal of a loan to working women is clearly a gender bias. Now in the case of my wife’s friend, her close relatives are not willing to be a co-applicant or guarantor. I do agree with their stand as i shared in my post, Beware of being a Home Loan Co-Applicant. Now someone will agree provided she make that relative a co-owner in the property. My question is why? as she is pooling entire money from her pocket. In short, Home Loan for Women is not truly for female borrowers. Some states give a discount on stamp duty if the property is registered in the name of women. What is the use of such schemes, if a women buyer cannot avail Home Loan for Women in the true sense. From my childhood days, i keep hearing about women empowerment. Trust me the empowerment is only pseudo women empowerment. “Roti, Kapda aur Makaan” are 3 basic necessities of a human being. Even a single working women also has a right to own a house without any dependency on others. Also, i would like to clarify that by single women i am not referring to only widows or divorcee. The women in the family should also have a right to own a house. If she is financially independent or has received lump sum amount from her savings then she should be able to buy property on her own. On the other hand, let’s check some of the reasons why banks refuse Home Loan for Women without a co-applicant or guarantor
Home Loan for Women – Why Banks don’t lend?
(a) Continuity of Source of Income:
The biggest concern of a home loan provider in a home loan for women is continuity of income. Normally, women take a career break when they plan to extend a family or after the marriage. In few cases, family circumstances force women to leave their settled career. In fact, in one the studies on NPA’s, it was mentioned that gross NPA is high in case of a home loan for women (Single Borrower). Bank is right to address such concerns, but such conditions can be handled differently. Banks can show flexibility and allow women borrowers to add a co-borrower and co-owner in such situations. Alternatively, if the women borrower wishes to sell the property during distress times then the bank can help to find a buyer. Though these are out of box solutions but it will help in true financial independence to women buyers. Another solution is to decrease the LTV ratio for women borrowers in a high-risk category. I am sure such steps will encourage more women to buy property independently.
(b) Insurance for Women:
Any home loan, be it a home loan for women should be backed by the insurance cover. In Indian society, the concept of women insurance is alien. Though the same risk rests with a male borrower but due to financial awareness, the default is not that high. At the end of the day, the objective of a bank is to recover their money in case of an unfortunate event. The solution to this problem is that home loan for women should be compulsorily bundled with Term Insurance Plan. Please note that i am not referring to Home Loan Protection Plan. The insurance policy can be assigned to the home loan provider in case of a home loan for women.
Why banks push Home Loan for Women in Current Form?
In current form the home loan for women is a trap. Banks are incentivizing by offering the discount of 0.05% in the interest rate. The only per-condition is that women should be a co-borrower. By doing so, the banks are hedging their risk. Assuming i took a home loan for women in the name of my wife and she is only a co-borrower. If something happens to me then bank will harass her. In such case, my wife will be in a big trouble. Assuming i have 2-3 more legal heirs then they can stake a claim in my property but will not bear the home loan liability. If i avail home loan for women in current form and something happens to me then i will pass a big liability for my wife. The entire liability of home loan will be on her shoulders. In an ideal scenario, the home loan liability should be passed to all the legal heirs.
The Solution:
The current form of home loan for women should be changed. The objective of such loan should be women empowerment and financial independence to the women. Currently, it is only serving the purpose of a risk hedging for banks. Currently, the borrowers don’t understand the implication of home loan for women in case of any unfortunate event. They are happy to include their wife for 0.05% lower interest rate. The existing product needs 360 degree revamp. Instead of 0.05% subsidy, the objective should be to encourage Women only borrowers. This is only possible by introducing a scheme similar to sukanya samriddhi account. Such scheme will be a right step towards financial inclusion of women. Though the law has given a lot of rights to women but now it’s time to move towards financial independence and true empowerment.
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