Introduction to real estate finance

The real estate market has always been able to attract investors due to the high returns that buying and selling property can generate. Even the global economic collapse had no adverse effect on this industry. The demand for commercial and residential properties continues to be very high. Therefore, financial institutions regularly offer loans for the purchase of homes or commercial buildings, so people with good credit history can easily borrow money to buy property.

What is Property Financing?

It is a broad term that describes the financial activities (mainly loans and loans) that take place in the real estate market. For any developed or developing country, it is an important wing of the economy as it provides funds for rapid urbanization activities such as housing construction, construction of shopping complexes, infrastructure development, etc.

In the residential sector:

Many lenders, such as banks, financial institutions, mortgage companies, private lenders, etc., provide financing for residential properties. Loan criteria remain the same and borrowers’ credit history checks are completed before loans are sanctioned or approved. Mortgage loan providers accept joint loan applications; if a single person does not qualify for the loan, then he or she can apply together with another family member.

In this case, the loan providers will do a background check on the applicants and their combined source of income should be enough to pay the Easy Monthly Installments. Initially, a security amount needs to be deposited before the money is approved. Financial documents must also be provided for scrutiny; loan rates are not that high in this sector.

Real estate finance in the commercial sector:

Money lending for commercial property is mainly done by nationalized banks, large financial institutions and very few private investors. Given the fact that commercial land or buildings are expensive, there is a huge risk factor involved in lending money for such properties. Therefore, these types of loans often require security in the form of collateral or guarantor; in many countries the government acts as a guarantor to help companies obtain the required capital.

The corporate sector provides job opportunities for many people and therefore the government in most countries helps this sector by acting as a guarantor for them to obtain real estate loans from financial institutions. However, such help is only provided after conducting a risk analysis on the project for which the money is needed.

For example, if a company requests financial help from the government to set up a new office in a city, the government will first look at the risk factors involved with this project, the benefits that people can derive from it, and its overall feasibility.