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sector financial institutionsReal estate, comprising open land or land with structures thereon, has almost all the attributes of an ideal security except that its `Conversion time' into hard cash involves a longer time span unlike any non-fixed asset.
Properly structured real estate loans/advances are advantageous and remunerative for the lenders in many respects. Not only that the real estate value appreciates gradually over time, the servicing of loan/advance in terms of repayment of Principal and Interest often becomes spontaneous. This is especially when mortgaged premises are let out and rental payments are directly deposited in the account maintained with the lending bank/financial institution.
From the socioeconomic angle in the developing/under-developed countries, in particular, real estate financing, which is taking shape by way of financing small dwelling houses for poor people. This real estate financing has high value implications aimed at the well-being of the masses. As per a dictionary, the word `estate' implies a landed property, i.e., simply land or land with a structure thereon. In that sense, the word `real' does not have any additional connotation from the viewpoint of lending.
It will appear that the classification need not always be compartmentalized. Sometimes, a portion of the land and building is occupied by the owner and the remaining portion is let out. Also developing a real estate may be for residential purpose or for multiple purposes.
The financing requirements for real estate may cover any of the above purposes. However, at present public sector financial institutions/banks treat financing residential premises for occupation by the borrowers with greater priority, especially low-cost houses for people with relatively low income.
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