Today, when someone thinks about buying a home, the first thing that comes to mind is a home loan. Every bank now offers loans with attractive interest rates and easy EMIs. But have you ever wondered — how did this concept start in India? There was a time when the term home loan didn’t even exist in the Indian banking system. Let’s look back at how it all began — who took India’s first home loan, which bank provided it, and how much money was involved.
When ‘Home Loan’ Wasn’t Even a Concept
India’s banking system has a long and evolving history. The establishment of the Reserve Bank of India (RBI) in 1935 gave the sector structure, while the nationalization of banks in 1969 and 1980 brought banking services closer to ordinary citizens.
However, until the 1970s, banks were primarily focused on lending to industries and businesses. There was no structured system to finance home construction for individuals. Even government banks were hesitant to explore this sector.
At that time, one company saw the potential in this gap — HDFC (Housing Development Finance Corporation). It became the first organized player to offer home loans in India, marking the beginning of a new financial revolution.
A House Worth ₹70,000, A Loan of ₹30,000
The first person in India to get a home loan from the organized sector was D.B. Remedios in 1978.
He was building a house in Malad, Mumbai, which cost about ₹70,000 back then. Remedios approached HDFC for financial assistance, and the company approved a loan of ₹30,000 — less than half the cost of the house.
While today, people can easily get up to 80% of a home’s value as a loan, getting even 50% financing at that time was a major breakthrough. The loan carried a fixed interest rate of 10.5%.
This ₹30,000 loan wasn’t just a routine transaction — it laid the foundation for India’s housing finance sector, paving the way for millions of homebuyers in the years to come.
How SBI Changed the Game with ‘Teaser Rates’
Even after HDFC introduced home loans, the market took years to develop. In 1994, home loan interest rates were still between 11% and 14%, and the average borrower was 42 years old, taking loans of around ₹39,000.
The real shift came when the State Bank of India (SBI) entered the market in a big way. SBI introduced the concept of “teaser rates” — low interest rates for the initial years, which would gradually increase later.
SBI could afford to do this because it had a large pool of CASA (Current Account and Savings Account) deposits, which reduced its overall cost of funds.
Other banks, unable to compete on interest rates, found different strategies — such as offering a higher Loan-to-Value (LTV) ratio, meaning borrowers could get loans covering 70–80% of the property’s cost.
The Law That Empowered Banks
Before 2002, banks faced a major challenge: what if a borrower defaulted on their home loan? There was no clear law to help banks recover their money. This made them cautious about entering the housing loan segment.
That changed with the introduction of the SARFAESI Act (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act) in 2002. This law gave banks the legal authority to seize and auction properties if borrowers failed to repay their loans.
