The urban housing loans are the ones that are mostly taken for the purchase of a flat, while the rural loans are mostly for the purchase of the flat and the construction of hutments or a bungalow. The demand for housing is more in the urban areas is more as compared to the rural areas. Houses in the urban areas typically mean the places which are under municipal jurisdiction. In contrast, the areas under the rural region are the ones in which are administered by Nagar Parishad or else Gram Panchayat. The registration & stamp duty charges are charged lower than the urban areas as the facilities provided to the people in the rural region are quite a few compared to the urban regions. Thus the property buyer saves a huge amount of money in taxes for the property purchased in rural regions compared to the urban regions. Due to the high migration of the people from rural to urban regions, the sale of properties in the urban region has risen drastically, and the prices of the property prices have seen a steady rise in the past few years. Urban housing provides a shorter area with higher prices compared to the rural region.
The numbers of lenders available to provide loans in urban regions are far higher as compared to the rural regions. The penetration of lenders in urban regions is fiercely competitive as many lenders try to generate business and gain market share due to high construction activity. At the same time, the rural places have limited lenders for providing loans to the borrowers. The FSI, i.e., floor space index, is higher in urban areas than rural ones. Thus due to high demand, there are tall sky-scrapers being built in the urban regions. The rural regions constitute either small-sized buildings or else bungalows. The home construction loans can be availed at the same interest rates as the loans taken for the projects in the home purchased from the real estate developers. The home loans tenure is for 30 years, depending on the age of the applicant. The higher the age lower is the tenure for which loans are approved, while the lower the age higher is the duration for which loans can be approved. The loans interest rates may sometimes vary according to the urban or rural region.
Difference between the purchases of the house in urban regions vs. rural regions:
- Interest rates for the home loans:
The interest rates are higher in the urban region, while the interest rates charged in rural regions can be lower due to the low cost of living. Urban homes have higher interests due to the high standard of living. The rural loans are mostly handled by the rural, regional co-operative banks or the public sector banks. The private banks or the NBFC’s very rarely operate in the rural regions.
- Fees & charges:
In urban regions, the banks charge a processing fee of 0.5%-2% for the home loans, while there could be minimal to no processing fees in the rural areas. Thus the charge levied by banks is less in rural areas.
- Eligibility & documentation :
The borrower in the urban region has to submit the income proof of the salary statement or the bank statement for income proof. In the case of the self-employed, the borrower has to submit the turnover statement and bank entries in the current account. While in rural regions, the applicant has to show land records of the farmland & also the verification of the crops being cultivated in the farmland.
- Loan tenure:
The loan tenure is more rigid in urban regions while it is more flexible in urban regions. There is no penalty being charged in the rural region for the pre-payment of loans.
We can conclude that more concessions are being given for the people in rural regions compared to the urban regions, like lower interest rates, flexible tenure, and less documentation as compared to urban regions. The disbursement of the loans is very high in urban regions as compared to the rural regions due to the high demand for homes in urban regions.