Housing finance system in Kerala

One of the major constraints to the growth of housing activity is inadequate availability of finance.  The housing finance system in the state of Kerala consists of two components – formal and informal.  Formal financing institutions have played only a minor role in the mobilization of household savings for housing.  The bulk of the population is still outside the reach of formal financing institutions due to various operational and structural inadequacies. 
 
More often, persons intending to undertake construction of new houses or conduct repairs and up gradation of existing houses prefer the informal financing system because of its flexibility and the speed with which funds can be made available.  It is worth noting that not many analytical studies have been undertaken regarding the main constituents and facets of informal financing system, the terms and conditions of finance, the socio-economic profile of the borrowers and the reasons for resorting to various sources of informal financing.
 
In Kerala Property values have appreciated like never before mainly due to the inflow of investments from all parts of the globe.  Also the building boom has been fuelled by the availability of funds through the informal financing institutions.  These financing institutions are a class apart and do not mind doling out huge sums of money as loans to the leading builders who have earned the trust of not only the general public but also of the business community.
 
Since most of the apartments and other built spaces are sold out in record time, repaying the loans is not at all a problem for these builders.  Recent studies have shown that the maximum amount of loans on offer has been availed by the leading builders in cities like Trivandrum, Kochi and Kozhikode, where a building boom is continuing unabated.  If this trend continues, more developments are likely to take place in the state.