I speak from my own experience of having taken a housing loan from the HDFC.
The loan was arranged through the builder from whom I had booked a flat. As I said in my review of the Chennai Metropolitan Development Authority, builders have their liaison men in all institutions with which they have to under-hand dealings, that is, transact illegally.
Knowing that I am a busy person, and knowing that my office is close to his, the builder simply informed me to go to his office at a particular time. His driver took me in a vehicle to the far away HDFC. He simply went inside, and in no time I was called in. There was no waiting. I was asked to sign certain papers(the application was filled and submitted in advance), and pledge my title deed from the builder, which when I realised the legal hurdles, realised that is no title deed at all.
As per the HDFC norms, its inspector has to inspect the premises and ensure that the construction is as per statutory regulations. I have reason to believe that no inspection was done, and the builder was greasing the palm of the concerned person on a regular person.
As far the loan is concerned, it was on equated monthly instalment(EMI), at 15.5 per cent interest or so. Simply stated, no matter what amount one pays, the interest is not calculated on the remaining amount, but remains constant on the loan taken initially. I discovered this much later, and HDFC has a way of deducting a very small amount per annum as principal amount, and the major chunk of the payment goes for interest.
Though because of the market slump the interest rate has gone down recently, including for housing loans, the HDFC has not made any changes in my interest rate. This must be true of other borrowers as well.
As for other financial agencies for housing loans, LIC is supposed to be a premier one. To get a loan from it one has to take an endowment policy, and the loan paid is based on some weird calculation involving salary, the amount for which insurance is taken, and so on.
That apart, the LIC policy is used as collateral security. LIC also insists on the signature of two or three sureties whose salary should be equal or more than the person who has applied for the loan.
Once a loan is taken, the repayment naturally doubles, one for the premium, and one for the housing loan. The LIC also has its agents for murky deals with builders and vice versa, and the loan is not attractive in any sense. This must be true of most other financial institutions also.
There are other agencies like Canfine, which are in the same category.
The best way of getting a housing loan is probably through housing societies, or the government’s Housing Board, which advertises from time to time for flats and plots for sale(outright and on instalment). Here the interest is reasonable, the person gets the flat or plot through lot, and as far as I know there are no intermediaries.
The Housing Board constructions may not be up to the mark. But the buyer has the choice to alter wood work, wiring, etc.
Another possible, and probably the best source is the Employees’ Provident Fund, if one is a subscriber to that. There the option is for withdrawal of a certain amount of the contribution, which is often sizeable.
If the person is an employee of government or a government establishment such as University, getting a loan is even easier, and at a lesser interest.
So depending on where you are, what you are, what your needs are, weigh the various options and decide.