Nearly 80% of Indian homebuyers relied on loans to fund their purchases in 2025, according to a Knight Frank report. But for many borrowers, accessing that credit remains a slow, opaque and often frustrating process, marked by heavy paperwork, inconsistent requirements and gaps between regulation and on-ground practice.

A February 2026 survey of over 7,400 individuals across rural, non-metros, and metros by BASIC Home Loan, a fintech company, underscores the strain: 43% cited excessive documentation as a challenge, while 17% faced prolonged approval timelines.

The friction runs across the home loan lifecycle—from application and approval to servicing and closure—driven as much by lender risk controls as by the absence of standardized processes.

Documentation and delays

Challenges begin early.

“During the loan approval stage, any discrepancy in paperwork can lead to loan reassessment and at disbursement stage, additional compliance checks by lenders can cause delays,” said Atul Monga, chief executive and co-founder of BASIC Home Loan, pointing to unclear requirements and repeated submissions as common hurdles.

Lenders, for their part, assess every application across three parameters. “Who you are, what you earn, and whether the property you are buying has a clean legal title,” said Adhil Shetty, chief executive, Bankbazaar.

For identity, PAN and Aadhaar are baseline documents. Salaried applicants must provide salary slips for the last three to six months, Form 16 and recent bank statements, while self-employed borrowers face stricter requirements, including three years of income tax returns, and in some cases, profit and loss accounts or balance sheets, according to Shetty.

Property checks add another layer. Lenders, Shetty said, must establish that the title is clean and free of legal disputes. But in practice, documentation demands often extend beyond this.

Take the case of a 51-year old non-resident Indian (NRI) who spoke on the condition of anonymity. While selling his property in Chennai, the buyer—purchasing it through a loan—said his bank wanted six months of the seller’s bank statements, citing a Reserve Bank of India (RBI) circular. The seller complied but remained unclear on why the information was needed.

Deo Shankar Tripathi, executive vice chairman of Aadhar Housing Finance, said such requests are aimed at preventing fraud and ensuring that the seller and bank account are genuine, and can also be used to corroborate the sale consideration.

RBI's Know Your Customer (KYC)/ Anti Money Laundering (AML)- Prevention of Money Laundering Act (PMLA) framework requires lenders to establish the identity of all parties involved in transactions above ₹50 lakh. But beyond that, there is no fixed checklist.

“While most of these requests are linked to verifying legal title, there is no fixed list prescribed and lenders can seek additional documents based on their internal risk assessment,” Shetty added.

The result is unpredictability—delays, repeated submissions and borrower frustration.

Privacy concerns

For some borrowers, the issue is not just the volume of paperwork but how it is handled. The NRI seller said sharing bank statements with the buyer could affect his bargaining position.

Another borrower, who also spoke on condition of anonymity, said his loan application was rejected after he raised data privacy concerns. He was uncomfortable sharing physical documents with on-ground staff and receiving calls from unverified numbers for mandatory discussions.

When he requested digital submissions and calls from a verified landline, his application was rejected.

Shaleen Goel, an ex- housing finance product head, said much of the document collection still happens through channel partners, direct selling agents, and field staff, where processes often lack standardization and oversight.

There is also a gap between regulatory intent and on-ground practices. “While frameworks like redacted Aadhaar-based KYC exist, their acceptance can vary across institutions and situations, leading to confusion for customers,” Goel said.

Each document serves a purpose in credit assessment, but the process of collecting and verifying them remains uneven, he said.

“More comprehensive documentation can enable lenders to offer better pricing due to higher confidence in underwriting, whereas simpler processes, often seen in some NBFC models, may come at a higher cost of credit,” Goel added, calling it a trade-off.

The trade-off

Non-banking financial companies (NBFCs) have gained traction among borrowers seeking quicker disbursals and more flexible norms but one persistent pain point for borrowers arises when they decide on closing or transferring the loan to another lender to save on interest.

Since 1 October 2019, banks are required to link new floating-rate loans to an external benchmark such as the repo rate, allowing borrowers to benefit more quickly from rate cuts. This requirement does not apply to NBFCs or housing finance companies.

As a result, a borrower with a loan at 8.5% may see rates fall by 20-30 basis points when repo rates decline, as they did in 2025, if the loan is with a bank. NBFC borrowers, however, may see delayed or partial transmission.

“NBFCs generally rely on the Prime Lending Rate that is usually determined by adding a lender's margin (operating costs, profit) to the central bank's repo rate,” said Pankaj Mathpal, managing director, Optima Money Managers, noting that NBFCs lack access to low-cost deposits.

Servicing issues can compound the problem.

Delhi-based Hari Singh, who took a home loan from an NBFC four years ago, said his interest rate rose from 8.35% to 10.20% without intimation. When he sought to foreclose the loan, he had to follow up for a month before the lender accepted payment, and did not receive a foreclosure letter despite multiple visits. The issue was resolved only after he escalated it on social media and emailed the company’s management.

Foreclosure and lingering obligations

Even closing a loan can bring fresh hurdles.

Under RBI rules, lenders must return original property documents within 30 days of foreclosure, failing which they are liable to pay ₹5,000 per day as penalty. Yet borrowers often face delays in practice.

There are also obligations that many borrowers discover only at the end of the loan cycle. Mumbai-based Rajendra Joglekar said he only learned at the time of closing his loan that a memorandum of deposit of title deeds (MODT) had been registered on his property by the NBFC.

In an equitable mortgage, the original property documents are deposited with the lender as security. While the borrower retains legal ownership, the lender acquires the right to recover dues in case of default. It is typically simpler and cheaper than a registered mortgage deed.

But where a memorandum of deposit of title deeds (MODT) is involved, closure can involve additional steps that are not always clearly understood upfront.

Six years on, Joglekar is still trying to complete the process, citing extensive paperwork and the fact that the office is in another part of the city. “A lot of lawyers were also not keen on taking up the cancellation,” he said, adding that the total cost would be around ₹10,000. In such cases, obtaining a clear title requires additional documents, including ID proofs, bank authorisation letters, and formal cancellation at the sub-registrar’s office.

Mathpal advised that banks typically collect original property documents before disbursement, so borrowers should ensure they obtain proper acknowledgment for all documents submitted.

Awareness and standardization

The persistence of such issues points to a broader gap—between what borrowers are told and what they ultimately sign up for.

“Borrowers must understand that the effective interest rate is the repo rate plus a spread charged by the lender. While the repo rate changes over time, the spread usually remains constant, making it important to secure a lower spread,” Mathpal said.

At the same time, industry participants point to the need for systemic fixes. Monga suggested a uniform, lender-agnostic document checklist communicated upfront, greater use of digital infrastructure such as DigiLocker and account aggregators, and clearer guidelines to minimise mis-selling by intermediaries.

“Clearer guidelines to minimise mis-selling by intermediaries, and mandatory full disclosure of charges and loan terms can help safeguard borrowers' interests and pre-defined timelines for approvals and loan disbursals can promote accountability across lenders,” he said.

Amol Joshi, founder of PlanRupee Investment Services, said simply requesting a complete document checklist upfront can resolve most issues. “Since these institutions are tightly regulated, staying informed about terms, conditions, and rules is essential,” he said.

The expansion of housing credit has made homeownership more accessible. But for borrowers, the cost of a home loan still extends well beyond the interest rate—to the time, complexity and uncertainty embedded in the process itself.

Nearly 80% of Indian homebuyers relied on loans to fund their purchases in 2025, according to a Knight Frank report. But for many borrowers, accessing that credit remains a slow, opaque and often frustrating process, marked by heavy paperwork, inconsistent requirements and gaps between regulation and on-ground practice.

A February 2026 survey of over 7,400 individuals across rural, non-metros, and metros by BASIC Home Loan, a fintech company, underscores the strain: 43% cited excessive documentation as a challenge, while 17% faced prolonged approval timelines.

The friction runs across the home loan lifecycle—from application and approval to servicing and closure—driven as much by lender risk controls as by the absence of standardized processes.

Documentation and delays

Challenges begin early.

“During the loan approval stage, any discrepancy in paperwork can lead to loan reassessment and at disbursement stage, additional compliance checks by lenders can cause delays,” said Atul Monga, chief executive and co-founder of BASIC Home Loan, pointing to unclear requirements and repeated submissions as common hurdles.

Lenders, for their part, assess every application across three parameters. “Who you are, what you earn, and whether the property you are buying has a clean legal title,” said Adhil Shetty, chief executive, Bankbazaar.

For identity, PAN and Aadhaar are baseline documents. Salaried applicants must provide salary slips for the last three to six months, Form 16 and recent bank statements, while self-employed borrowers face stricter requirements, including three years of income tax returns, and in some cases, profit and loss accounts or balance sheets, according to Shetty.

Property checks add another layer. Lenders, Shetty said, must establish that the title is clean and free of legal disputes. But in practice, documentation demands often extend beyond this.

Take the case of a 51-year old non-resident Indian (NRI) who spoke on the condition of anonymity. While selling his property in Chennai, the buyer—purchasing it through a loan—said his bank wanted six months of the seller’s bank statements, citing a Reserve Bank of India (RBI) circular. The seller complied but remained unclear on why the information was needed.

Deo Shankar Tripathi, executive vice chairman of Aadhar Housing Finance, said such requests are aimed at preventing fraud and ensuring that the seller and bank account are genuine, and can also be used to corroborate the sale consideration.

RBI's Know Your Customer (KYC)/ Anti Money Laundering (AML)- Prevention of Money Laundering Act (PMLA) framework requires lenders to establish the identity of all parties involved in transactions above ₹50 lakh. But beyond that, there is no fixed checklist.

“While most of these requests are linked to verifying legal title, there is no fixed list prescribed and lenders can seek additional documents based on their internal risk assessment,” Shetty added.

The result is unpredictability—delays, repeated submissions and borrower frustration.

Privacy concerns

For some borrowers, the issue is not just the volume of paperwork but how it is handled. The NRI seller said sharing bank statements with the buyer could affect his bargaining position.

Another borrower, who also spoke on condition of anonymity, said his loan application was rejected after he raised data privacy concerns. He was uncomfortable sharing physical documents with on-ground staff and receiving calls from unverified numbers for mandatory discussions.

When he requested digital submissions and calls from a verified landline, his application was rejected.

Shaleen Goel, an ex- housing finance product head, said much of the document collection still happens through channel partners, direct selling agents, and field staff, where processes often lack standardization and oversight.

There is also a gap between regulatory intent and on-ground practices. “While frameworks like redacted Aadhaar-based KYC exist, their acceptance can vary across institutions and situations, leading to confusion for customers,” Goel said.

Each document serves a purpose in credit assessment, but the process of collecting and verifying them remains uneven, he said.

“More comprehensive documentation can enable lenders to offer better pricing due to higher confidence in underwriting, whereas simpler processes, often seen in some NBFC models, may come at a higher cost of credit,” Goel added, calling it a trade-off.

The trade-off

Non-banking financial companies (NBFCs) have gained traction among borrowers seeking quicker disbursals and more flexible norms but one persistent pain point for borrowers arises when they decide on closing or transferring the loan to another lender to save on interest.

Since 1 October 2019, banks are required to link new floating-rate loans to an external benchmark such as the repo rate, allowing borrowers to benefit more quickly from rate cuts. This requirement does not apply to NBFCs or housing finance companies.

As a result, a borrower with a loan at 8.5% may see rates fall by 20-30 basis points when repo rates decline, as they did in 2025, if the loan is with a bank. NBFC borrowers, however, may see delayed or partial transmission.

“NBFCs generally rely on the Prime Lending Rate that is usually determined by adding a lender's margin (operating costs, profit) to the central bank's repo rate,” said Pankaj Mathpal, managing director, Optima Money Managers, noting that NBFCs lack access to low-cost deposits.

Servicing issues can compound the problem.

Delhi-based Hari Singh, who took a home loan from an NBFC four years ago, said his interest rate rose from 8.35% to 10.20% without intimation. When he sought to foreclose the loan, he had to follow up for a month before the lender accepted payment, and did not receive a foreclosure letter despite multiple visits. The issue was resolved only after he escalated it on social media and emailed the company’s management.

Foreclosure and lingering obligations

Even closing a loan can bring fresh hurdles.

Under RBI rules, lenders must return original property documents within 30 days of foreclosure, failing which they are liable to pay ₹5,000 per day as penalty. Yet borrowers often face delays in practice.

There are also obligations that many borrowers discover only at the end of the loan cycle. Mumbai-based Rajendra Joglekar said he only learned at the time of closing his loan that a memorandum of deposit of title deeds (MODT) had been registered on his property by the NBFC.

In an equitable mortgage, the original property documents are deposited with the lender as security. While the borrower retains legal ownership, the lender acquires the right to recover dues in case of default. It is typically simpler and cheaper than a registered mortgage deed.

But where a memorandum of deposit of title deeds (MODT) is involved, closure can involve additional steps that are not always clearly understood upfront.

Six years on, Joglekar is still trying to complete the process, citing extensive paperwork and the fact that the office is in another part of the city. “A lot of lawyers were also not keen on taking up the cancellation,” he said, adding that the total cost would be around ₹10,000. In such cases, obtaining a clear title requires additional documents, including ID proofs, bank authorisation letters, and formal cancellation at the sub-registrar’s office.

Mathpal advised that banks typically collect original property documents before disbursement, so borrowers should ensure they obtain proper acknowledgment for all documents submitted.

Awareness and standardization

The persistence of such issues points to a broader gap—between what borrowers are told and what they ultimately sign up for.

“Borrowers must understand that the effective interest rate is the repo rate plus a spread charged by the lender. While the repo rate changes over time, the spread usually remains constant, making it important to secure a lower spread,” Mathpal said.

At the same time, industry participants point to the need for systemic fixes. Monga suggested a uniform, lender-agnostic document checklist communicated upfront, greater use of digital infrastructure such as DigiLocker and account aggregators, and clearer guidelines to minimise mis-selling by intermediaries.

“Clearer guidelines to minimise mis-selling by intermediaries, and mandatory full disclosure of charges and loan terms can help safeguard borrowers' interests and pre-defined timelines for approvals and loan disbursals can promote accountability across lenders,” he said.

Amol Joshi, founder of PlanRupee Investment Services, said simply requesting a complete document checklist upfront can resolve most issues. “Since these institutions are tightly regulated, staying informed about terms, conditions, and rules is essential,” he said.

The expansion of housing credit has made homeownership more accessible. But for borrowers, the cost of a home loan still extends well beyond the interest rate—to the time, complexity and uncertainty embedded in the process itself.