Rural Home Loans: Financing Options Outside Urban Areas

Assuring affordable housing for all is a goal of the Indian government made attainable by home loans for rural areas. These loans have unique characteristics including zero to extremely low processing fees, open eligibility requirements, and minimum paperwork requirements. Maximum repayment terms of up to 30 years are available, with interest rates ranging from 8.05% p.a. to 13.75% p.a., and the loan amount of Rs. 2 lahks to Rs. 75 lahks can be borrowed.

Table of Contents

Top 10 Rural Home Loans 2023

Name of the Bank	Rate of Interest	Fee of Processing	Amount of Loan	Tenure
LIC HFL Home Loan	8.40-8.50% (Floating)	Upto 0.25% (Max s. 25,000) (One Time)	Rs. 30 Lacs – Rs. 5 Cr.	5-30 Years
Karnataka Bank Home Loan	8.17%-8.99% (Floating)	0.50% – 2.00% (One Time)	Rs. 20 Lacs – Rs. 5 Cr.	1-30 Years
HDFC Ltd. Home Loan	8.60% (Floating)	Rs. 3,000 – Rs. 5,000 (One Time)	Rs. 5 Lacs – Rs. 10 Cr.	1-30 Years
Indiabulls Home Loan	8.99%-9.75% (Floating)	Upto 1.00% (One Time)	Rs. 2 Lacs – Rs. 3 Cr.	1-30 Years
Sundaram Home Finance Limited Home Loan	6.95% – 8.30% (Floating)	0.50% (One Time)	Rs. 12 Lacs – Rs. 5 Cr.	1-30 Years
Axis Bank Home Loan	6.90% (Fixed)	0.50% (Min. Rs. 10,000) (One Time)	Rs. 5 Lacs – Rs. 10 Cr.	1-30 Years
DBS Home Loan	7.20% (Floating)	Rs. 10,000 (One Time)	Rs. 50 Lacs – Rs. 5 Cr.	1-25 Years
Aditya Birla Capital Home Loan	9.00%- 12.50% (Floating)	Upto 1.00% (One Time)	Rs. 20 Lacs – Rs. 10 Cr.	1-30 Years
Union Bank of India Home Loan	8.60% (Floating)	Upto 0.50% (Max Rs. 15,000) (One Time)	Rs. 25 Lacs onwards	1-30 Years
Indiabulls Home Loan	9.25%-11.20% (Fixed)	Upto 0.50% (One Time)	Rs. 2 Lacs – Rs. 3 Cr.	1-30 Years

Eligibility Criteria for Rural Home Loan

The following conditions must be met to qualify for rural home loans:

Indian nationals
Age of 21 or older
Stable and consistent income
Candidates who are single people or joint applicants with family members who have a consistent source of income, such as a parent, spouse, or children
Farmers, business owners, independent contractors, salaried workers, and professionals are all eligible.
Check your Eligibility for a Home Loan

Types of Rural Home Loans Available

There are a variety of home loans for the rural area available in the market, enlisted below are some types of rural home loans provided by the top 10 banks:

LIC Housing Finance Ltd.

Home Loans
Plot Loans
Griha Suvidha Home Loan
Home Loan for NRI
Home Loan for Pensioners Home Improvement Loan
Home Construction Loan
Home Extension Loan
Top Up Loan

Karnataka Bank Home Loan

KBL Home Comfort
KBL Ghar Niveshan

HDFC Ltd. Home Loan

Home Loan
Plot Loan
Rural Housing Loan
House Renovation Loan
Home Extension Loan
Top Up Loan

Indiabulls Home Loan

Home Loan Balance Transfer
Home Renovation Loan
Home Extension Loans
Rural Home Loans

Sundaram Home Finance Limited Home Loan

Home Loans
Plot Loans
Home Improvement Loans
Home Extension Loans
Top Up Loans
Take Over Loans
Loan Against Property

Axis Bank Home Loan

Axis Bank Home Loan
Quick Pay Home Loan
Shubh Arambh Home Loan
Fast Forward Home Loan
Asha Home Loan
Top – Up Home Loan
Super Saver Home Loan
Power Advantage Home Loan

DBS Home Loan

Home Loan

Aditya Birla Capital Home Loan

Home Loans
Home Extension Loans
Home Improvement Loans
Plot and Home Construction Loans
Home Construction Loans

Union Bank of India Home Loan

Union Home Loans
Union Awas Loans
Union Smart Save Loans

Documents Required for Rural Home Loan

Given below are the documents required for applying for a home loan in rural areas:

When applying for a loan, the following documentation must be provided:
Evidence of income and identification, such as:
Current passport
Voter ID
Card Aadhar
D. Card
Any KYC documents that the bank may require

Farmers must provide evidence of their revenue, such as:

Bank statements over the last six months
Agricultural land title documents as a copy as proof of ownership
Copies of the title documents for agricultural land as evidence that crops are being grown

Salary applicants must provide income documentation, such as:

Card PAN
Recent six-month bank statement
3 most recent pay stubs
A recent IT return
Form 16

Self-employed applicants must provide evidence of their income, such as:

D. Card
IT evaluation during the past three years
Financial statement for the company
Accounts for both personal and business use

How to Apply for a Rural Home Loan?

One can apply for a rural home loan by either visiting the bank’s website or going to the branch of the selected bank.

Government Schemes for Rural Housing Finance

The table below lists the many PM Rural Housing Scheme programs available in India:

Scheme/Program	Description
Pradhan Mantri Awas Yojana	The main vision is to provide housing for all. This rural housing scheme will provide financial assistance for the building of houses in rural areas and offer interest sponsorships on housing loans.
Indira Awaas Yojana	The mission is to provide housing to the rural poor people belonging to minor communities like SC (scheduled castes), ST (scheduled tribes), freed bonded laborers, denotified tribes, and other BPL (below the poverty line) families.
Gramin Awaas Mission	The intent of the scheme is to provide a house with basic amenities to all rural households.
Deen Dayal Upadhyaya Gram Jyoti Yojana	This scheme will focus on providing a continuous power supply to rural areas. It will provide access to electricity for all households and farms.
Pradhan Mantri Gram Sadak Yojana	To make the connectivity of the roads in rural areas across the country better.
State-run Housing Schemes	These state-run housing schemes are designed to provide affordable homes for all people who are not able to afford them otherwise. These schemes also target specific communities.

Advantages of Taking a Rural Home Loan

There are numerous advantages of taking a rural home loan, enlisted below are the major ones:

No or very little processing charge
Lowering of interest rates
Certain banks provide free insurance coverage.
Lower loan margin requirements range from 10% to 20%.
Extended repayment terms
Added repayment flexibility
Help with customized documentation
Door-to-door loan servicing
No early payment fee
Some banks give a moratorium period of up to 18 months.

Disadvantages of Taking a Rural Home Loan

There are some disadvantages of taking a rural home loan as well, enlisted below are some:

A major commitment for a longer period of time
A home loan entails a lot of risks
One might lose some great investment opportunities
The HRA component might become taxable

Repayment Options for Rural Home Loans

Most lenders provide tempting interest rates and offer house loans to entice clients. Although obtaining a house loan is simple, paying it back can occasionally be difficult. Therefore, before choosing a repayment plan, one must consider all of the possibilities when applying for a home loan. Given below are the 7 home loan repayment options that one can choose from:

EMI Holiday

At the start of the house loan repayment period, only a few lenders offer EMI holidays. A delay or postponement in the EMI deduction from the borrower’s bank account is known as an EMI holiday. The wait often lasts a few months after the mortgage loan has been disbursed. It aims to provide the borrowers the option to start paying payments three months after taking up the home loan.

Step-up Repayment

Step-Up Since repayment requires extending the loan’s term, the EMI will increase. You can pay a lower EMI during the first few years of loan repayment, but as the loan tenure lengthens, the amount will climb.

Step-Down Repayment

In contrast to Step-Up Repayment, Step-Down Repayment involves the borrower receiving smaller EMI payments as the loan period progresses. A borrower must pay a greater EMI amount throughout the first few years of the house loan term; as time goes on, the amount starts to decrease.

Lump Sum Repayment

Lump-sum Repayment enables borrowers to pay off the entire loan balance as soon as the loan term is up. Home loans arranged for homes that are still being built are typically disbursed in installments that are phased out according to how quickly the construction is going.

Balloon Repayment

Lump-sum repayment and balloon repayment are comparable in certain ways. However, in this case, the borrower is able to pay a sizable sum for the final instalment—nearly one-third of the overall loan amount.

Refinancing

Refinancing is the process of getting a new loan to pay down the balance of an existing mortgage. Refinancing can be obtained with better repayment alternatives and reduced interest rates. This permits the borrower’s ability to make repayments to continue unaffected.

PrePayment

If someone has extra money, they can prepay their home loan EMI. By enabling the borrower to pay back the loan as quickly as possible, prepayment reduces the loan term. Prepayment is permitted on all or a portion of the outstanding loan balances. This choice greatly reduces the monthly installment for any house loan. It is significant to remember that a select few home loan companies may impose fees for choosing to make prepayments. Therefore, if one is thinking about making a prepayment, they should be informed of these penalty fees.

Related Resource

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FAQs

Can a Gram Panchayat co-operative bank give me a home loan?

Yes, one can get a home loan from a co-operative bank which comes under Gram Panchayat,which also needs to be approved by the government.

Can my credit score affect my rural home loan eligibility?

The credit score affects one's eligibility for a rural home loan as it is a deciding factor and provides an intel on how trustworthy and punctual the applicant is with the repayments etc.