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Wednesday 17 July 2019
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Home Loans – a Viable Solution for Alleviating the Housing Shortfall in Developing Countries

Home Loans – a Viable Solution for Alleviating the Housing Shortfall in Developing Countries

Since the last six decades, rapid urbanisation has become a significant developmental feature of developing countries around the globe. While urbanisation has brought several benefits to the cities, it has created a number of challenges in its wake. One of the most notable of these issues pertains to the overt housing shortfall prevalent in these locations.

The housing crisis is much worse in countries where the median population group has to put up with the provision of low to mid-range incomes; and where the major cities have been subjected to rapid expansion spells as a result of the people pouring in from less developed areas.

With such a fast pace of infrastructural growth, the governments in these countries have largely remained unable to oversee an equally fast-driven developmental process. As a result, most urban-dwellers only have recourse to the poor housing facilities at their disposal – few of which can be considered affordable.

Impact of Urbanisation on Housing Facilities

Renowned experts from around the world have predicted that global cities will expand by 2.5 billion people – collectively – once we reach the year 2050. The rapid explosion of their populations – especially around their urban centres – will only perpetuate the severe housing crises that they are already afflicted with.

If urbanisation continues without overcoming its various consequential challenges, it can negatively impact its affected social setups. Worldwide, urban centres have undergone a process of gentrification. There also has been an upward trend in the development of gated communities.

Such developments have increased the costs in the surrounding areas, forcing other economic groups to relocate. Often the relocations put people far away from their workplaces; leading to increased expenses due to longer commutes. Eventually, the countries end up becoming victims to economic disparity; leading to unwanted societal issues.

Thus, we come back to the issue where it is important that governments make efforts to provide affordable housing facilities to the public. One way to do this is to increase the popular disbursement of home loan facilities.

Home Loans for Alleviating the Housing Crises

Home loan facilities are hardly news for the denizens of developing countries. Most people acquire such financial help from banks, but many have switched to private lenders. In some countries, the governments themselves offer home loan schemes in order to resolve specific housing grievances.

If implemented properly, home loans can play a positive role in overcoming the housing shortfall in developing countries. Most people in need of affordable housing, however, can’t really avail such financial provisions to finance their residential aspirations.

Nowadays, easy home loans have become a necessity for resolving the housing crises. A large number of people thrive on rent in developing countries. Urbanisation has also increased rental rates, forcing many to live with poor-quality residential amenities despite the costly monthly instalments that are demanded. Additionally, a lot of people have to pay for utility bills on top of the rental cost.

With convenient home loans, people can choose to pay the monthly instalments instead of the rent. In a few years, they end up becoming the owners of their personal living quarters. With a good home loan option, they can probably choose a better area to live in too; closer to their work premises and other essential amenities such as schools, hospitals, shopping centres, etc.

Global Home Loan Problems

There are a number of platforms that provide home loans nowadays. But not a lot of people have benefited from these. The reason is that home loans are not convenient or easy enough to avail for everyone. Therefore, they have done little for making housing affordable.

In fact, in some regions of the world, the mortgage industry has only created more problems. The interest rates have increased, forcing many people into foreclosure and bankruptcy.

Here are some of the challenges related to home loans people are facing around the world:

Complicated Application Processes

In an age where people love instant results, following a long and complicated process for anything amounts to being an inconvenience. Unfortunately, home loans fall under this category.

Nowadays, private lenders who offer online loans have cut application steps considerably. But they are not as reliable as reputed sources like banks and government-backed financial institutions.

Banks need to come up with a uniform procedure for home loan applications – eliminating disparity from one authority to another, as well as excessive red tape.

Income Requirements

It makes sense that financial institutions require home loan seekers to have a permanent source of income along with some documented proof to show for it. However, home loans don’t remain feasible for low-income people when there are restrictions pertaining to levels of income.

To give more people access to affordable housing, home loans should be available for different economic classes. Specific reforms should be introduced so that more income levels can become eligible for house financing.

Credit Checks

Banks and other financial institutions determine the credit history of potential borrowers in order to check their ability to pay back. However, many people suffer from debt situations so their credit scores don’t normally reveal a good result.

While credit checks are important, it is equally important to initiate alternative solutions for those with poor credit histories. In many developing countries, online lenders are flexible with customers who have bad credit profiles, but often their provisions come at the expense of other restrictions.

Perhaps, creating such alternatives would be a long shot. But what governments and even private financial institutions can do is to start campaigns and introduce regulations that pull people out of debt situations; thereby enabling them to become eligible for home loans in the near future.

Increased Interest Rates

When people acquire home loans, they are normally well aware that they would have to pay a sizeable interest amount with their repayments. In many developed countries, these interest rates – thanks in large part to the global economic situation – have become increasingly volatile. As a result, people would rather live on rent and even suffer through poor living conditions than deal with paying such huge sums of money.

If governments, as well as the other private sector authorities concerned, can resolve these home loans issues in developing countries, more people would have access to affordable housing. In most urban regions of the world, the public has become more knowledgeable regarding their real estate options; thanks in large part to online property portals like Prop.pk and 99acres.com. Yet, a large number of people can’t actually afford these options. Therefore, averting the housing crises with easy, accessible, and affordable home loans would not only help urban dwellers – but the real estate industry too.