Home construction loans are the loan taken by the borrower for building up of own house. Such Loans are taken by the individual who owns the plot and wants to construct their own house. Also, loans are taken by the people who own the plot jointly and want to constructs houses in the building at their own cost on a cooperative basis. The loans are charged at interest rates of 7-10% per annum. The processing fees charged are 0.40% + taxes as applicable. The loans can be availed for a tenure of a maximum of 30 years. The bank requires various documents for the approval of loans which need to be submitted to the lender. The loans can be opted by a person in the age group of a minimum of 21 years and a maximum of 70 years or retirement age, whichever is early. The home construction loans benefit the borrower in such a way that the borrower does not have to shell own funds from past savings; instead, can avail of loans and repay the loan amount from the running income. The banks verify the documents of the structural ones to ensure that the construction should be done properly.
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The banks approve loans; only the FSI is legally granted to the applicant. The applicant should be able to provide the documents of the FSI being approved by the town planning authority. The banks may reject the loans for the illegal structures or unauthorized constructions that may be done. Also, for the construction of the house, the cost estimate is taken into consideration by the bank. Bank approves loans only the construction cost, which is adequately required. Banks are cautious that there should not be any misuse of the loans being done if the higher amount is availed compared to the actual construction cost. Joint loans can also be taken to form the cooperative credit society to construct the building on the plot owned by the group of people who own the plot either for new construction or else for the redevelopment of the plot. The loans to value ratio can be 100% of the estimate or 90% of the property value, whichever is lower. The borrower can avail of tax benefits under the income tax act and thus can save money on payment of taxes.
Documents required for the construction of homes:
- Duly filled application form along with passport size photograph.
- Proof of age.
- Government identity proof like pan card, aadhar card, driving license, voter id card, passport. Etc.
- Income proof/bank statement.
- Address proof.
- Land-related documents.
- The estimated cost of construction.
- Structural documentation made by the structural consultant.
- The architectural plan was approved by the plan sanctioning authority.
Process for applying for loans:
- The applicant needs to fill the form online through the official website or by visiting the bank branch.
- The applicant needs to submit all the necessary documents to the bank or upload the documents online on the bank’s official website.
- The bank verifies the site where the construction needs to be done. And also verifies the documents submitted by an individual.
- Bank also verifies an individual’s credit score based on the identity proofs being submitted to the bank.
- After complete verification of the documents, credit score & site verification bank approves the borrower’s loans.
- After the approval of the loan, the bank disburses the amount in the applicant’s bank account in installments.
Hence the approval of the home construction loans is quick and easy, and the borrower should take advantage of the availability of loans and thus should avail it. The banks approve the loans up to 100% of construction cost or 90% of the property values, whichever is less. After submitting the documents, the banks start disbursing the amount installment-wise, and the loan is usually approved within seven working days by the bank. The borrower can do the application process either by visiting the nearest bank branch or online mode.