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Many
economies have met with fair degree of success in inflation
management. Lower inflation (and lower interest rates
as a consequence) provides the necessary environment
for the growth of housing finance. In a liberalized
and globalized environment, investment funds have been
freely flowing across the globe. With the recent spurt
in the GDP growth across many countries, many people
have been aspiring to realize their life time dream,
namely owning a home.
Housing
finance has prospered through the innovative application
of technology. Transaction costs have crumbled, large
number of transactions are now executed with speed and
accuracy. Data collection, processing and customer services
have acquired efficiency through automation. Many housing
finance products are used with ease and convenience
in a superior IT environment. New delivery channels
have come into use.
Many
nations have been encouraging private sector initiatives
in housing finance, with a view to meet the ever-growing
demand. There are tax shelters for the borrowers. The
legal environment has been gradually becoming lender
friendly with rational foreclosure laws.Lending
institutions have been generally operating under conditions
of financial stability with accent on rational loan
pricing, relying essentially on credit scoring models.
The securitization route has helped them in lowering
the regulatory capital even while handling higher volumes
of loans, besides transfer of credit, interest rate
and liquidity risks. The new Basel Accord stipulates
lower regulatory capital for housing loans.
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