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33% of Overseas Edu-Loans backed by Property

Over three hundred thousand Indian students go overseas for education annually. While a majority of them to take a loan for overseas education, a whopping 33% of these loans availed are property-backed. The cost of education and living overseas can easily run into crores, yet students insist on going abroad because of the quality of education on offer.

Increasingly, there is a multi-fold increase in the number of students going abroad for undergraduate courses, which was up until two years ago not the case, as mostly postgraduate students pursued education outside of the country.  Piyush Agarwal of Abroad Education Consultants gets almost half his business from students seeking admission in undergraduate schools abroad. He said most of the undergraduate aspirants are from North India and find it tough to get into the top local colleges.

USA is the preferred destination for most overseas-bound students.


For agencies providing such loans, real estate is better collateral. Banks and finance companies are always comfortable lending against property, especially when the amount involved is very high, because they have the collateral in case of a default, said Sreenivasan Ramakrishnan, co-founder of Career Launcher. Adding, he said “As the disposable incomes of the upper middle-class and middle-class rise, there will be more and more first-generation undergraduate admission seekers emerging from India.” Consultants say over 80% of education loans have been taken with personal homes as collateral. In Mumbai, ReachIvy’s Vibha Kagzi says 70% of its clients offer their homes to back loans. Neeraj Saxena, chief executive officer at Avanse Financial Services, said earlier, education loan sizes remained between Rs 25 lakh and Rs 60 lakh. “Today, if a student is going abroad for further studies, it could cost anything between Rs 50 lakh and Rs 1.5 crore, depending on the course. For this, most banks will not give unsecured loans,” he explained.
Unsurprisingly, The States is the preferred destination as there were about 103,000 Indian students in the US in the academic year 2013-14, more than double the number of students 15 years ago. Engineering is the most popular major, followed by computer science, according to the US embassy in New Delhi. “The aspiring middle class wants to send their children abroad for undergraduate studies, especially in the north of the country, which wasn’t the case until three years ago. Though, in the south of India, 80% still want to pursue post-graduate studies abroad,” said Agarwal.  Rajdeep Chimni of New Delhi-based Admissions Gateway said for the schools he consults with, 30-40% of the children apply for courses in the US primarily because it is easier to get admission there than in India.
However, many of these families aren’t as affluent to afford the entire fee and cost of living, and end up pledging property, usually homes, as collateral for loans. The number of Indians studying overseas was 189,472, according to UNESCO figures for 2012, the latest figures available. However,  Industry experts suggest that 2.5 lakh-3 lakh students from India travel abroad every year to study and at least one in three takes a property-backed loan.

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