Anyone who has spent time in retail lending has seen this happen. A schoolteacher with 15 years of service and a clean repayment record applies for a home loan. She gets a sanction far smaller than she needs, or none at all. She is not a risky borrower. She is exactly the kind of customer a lender should want. Yet the system makes her wait.
Loan-to-value caps also tighten as loan size grows, so the very customers buying premium homes must bring the biggest share of their own money upfront. Many end up borrowing less than they easily could, or selling investments they wanted to hold.
Now look at the other end, the affordable segment, where housing demand is deepest. The borrowers here are a kirana store owner, a tailor, anda driver. The income is real and regular but poorly documented. Bank statements understate cash earnings, and there is no Form 16 to anchor the file.
Lenders do run assessed-income programmes, but these vary widely and depend heavily on the judgement of the individual credit officer. Add a thin credit history, a property in a peripheral location, and a family that would repay faithfully for twenty years, and they cannot clear the first screen.
The surgeon and the shopkeeper look nothing alike on paper. But both are sound borrowers stuck in formats that the system does not read well. At both ends, real repayment capacity goes unrecognised, and lenders lose good business.
What a creditworthy borrower can do
A few simple things help. Route income through bank accounts so that earnings are visible, not just earned. Stay disciplined on every small loan and credit card, because the bureau remembers everything. Add an earning co-applicant where possible, since it strengthens the household’s repayment capacity on paper. And if you are self-employed or have variable income, treat documentation as an investment. File taxes consistently, keep statements in order, and declare obligations honestly. A truthful file always moves faster than a flattering one.
Borrower effort alone, however, cannot fix a structural gap, and the good news is that the system is evolving. Lenders are getting better at cash-flow-based lending, using GST data, account aggregators and banking analytics to read incomes that pay slips miss. The mortgage guarantee, now an established risk-sharing mechanism in Indian housing finance, adds another layer to this.
When part of the credit risk on a loan is guaranteed, two useful things follow. Underwriting becomes more uniform, because guaranteed loans from many lenders pass through one consistent assessment framework, which brings a common yardstick where today there is a patchwork. And eligibility improves, because a lender that shares its risk can responsibly offer the same borrower a higher amount, a longer tenure or a larger share of the property value. This flexibility matters as much to the professional with a high but unconventional income as to the family stretching for its first home.
India does not lack housing demand, and it does not lack capital. The gap lies in connecting the two for borrowers whose repayment capacity is real but hard to read from standard documents. Better data, stronger documentation and sensible risk-sharing can close that gap. For lenders, this is good business waiting to be written. For the surgeon, the shopkeeper and the schoolteacher, it is the difference between waiting for a home and owning one.
Anuj Sharma is chief operations officer, IMGC. Views are personal.