Page 185 - DMGT515_PERSONAL_FINANCIAL_PLANNING

Personal Financial Planning

Notes 10.3 Mortgages and its Types

10.3.1 Meaning

A debt instrument that is secured by the collateral of specified real estate property and that the
borrower is obliged to pay back with a predetermined set of payments. Mortgages are used by
individuals and businesses to make large purchases of real estate without paying the entire
value of the purchase up front.

Mortgages are also known as “liens against property” or “claims on property”.
10.3.2 Types of Mortgage

The types of mortgage that are accepted in the Indian mortgage industry for the facilitation of
mortgage loan are varied. Until recently, the Indian mortgage market was under the unorganized
sector. The Government of India liberal economic policy in the late 1990s the facilitated the
entry of Foreign Institutional Investors (FIIs) and Foreign Direct Investment (FDI) in the Indian
market. The Indian markets which were previously closed to such investments registered
tremendous economical growth across all industry sectors.

In the last 15 years, the growth of the manufacturing industry in India propelled the growth of
infrastructure industry in India. Furthermore, with the growth of infrastructure industry in
India, the Indian mortgage loan industry witnessed tremendous growth. Today, the organized
mortgage loan sector of India is registering astronomical growth and it is estimated to be US$ 18
billion industry. The Indian mortgage loan industry is consistently registering 20-50 % growth
on a year-on-year basis, from the year 2000 onwards.
Huge real estate requirements in India and their subsequent development have fueled its growth.
The mortgage industry of India could break open from its age old image of being housing
mortgage facilitator only. Today, the types of mortgage that are being accepted as collateral are
varied and not confined to residential property only. The types of mortgage accepted as collateral
security for facilitating mortgage loans in India are as follows:

Amusement parks
Bowling centers
Casinos
Auto care centers

Auto dealerships
Car washes
Parking garage

Truck terminal
Conveniences stores
Distribution centers
Fitness centers
Franchises

Funeral homes

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