Property-related costs in India are escalating by the minute. In such a scenario, buying a ready-to-move -in house could prove expensive. The same is true if you are buying a ‘resale’ house with high market value. As compared to these options, the purchase of an under construction property is reasonably a better investment. Today, there are several banks and Non-Banking Financial Companies (NBFCs) in the market that grant a home loan for under construction projects.
When it comes to home loans for under-constructions projects, the loan provider will not disburse the entire amount after your loan request has been approved. Instead, the loan is disbursed through a number of installments, depending on the completion stage of the project. However, as a borrower, you might have to pay the Equated Monthly Installments (EMIs) on whatever portion of the loan amount has been disbursed. For instance, imagine that your home loan for an under-construction project has been approved for INR 90 lakhs and this amount is divided over a total of 9 installments. Suppose the bank disburses the first installment of INR 10 lakh for your loan, then you will have to pay an EMI only on that 10 lakh and not the entire home-loan amount to be received.
As it is evident from the above-mentioned example, generally, the amount borrowed for a home loan is considerably on the higher side as compared to other types of loans. Therefore, it is important to plan out a proper approach before applying.
Below mentioned are 5 tips on home loan for under construction projects that can help in this planning:
1. Do Your Research
As mentioned before, taking a home loan involves availing sizable funds. To ensure, that your investment is worth the loan debt, you have to be vigilant with respect to under-construction projects. Ensure, that your property of investment is actually a profitable bet. For that, it is advisable that you research on the locality’s property value and compare it to the price quoted by the builder. Understand the terms and condition of the property deal. After doing this research, estimate how much funds you can manage on your own for investing in the property and how much amount would further be needed as a home loan. It is important that you do all these calculations before approaching any home loan provider. In some cases, the home loan providers themselves assist in evaluating the property’s worth, checking the builder’s credibility and in providing other necessary information. For instance, the Bajaj Finserv Home Loan gives access to property dossier that details legal and financial information pertaining to real estate ownership and even assists in paying home loans with customized insurance plans.
2. Check Your Builder’s Commencement Certificate
You will see a number of new construction projects starting on a daily basis. However, not all these constructions could be legally approved. As a potential property buyer, you need to maintain certain caution. Ensure that your builder has gotten approval from all the concerning authorities for building the project, especially a Commencement certificate. A Commencement certificate ensures that your builder has been legally approved for constructing the said project. A copy of the commencement certificate of the builder improves your chances of availing a home loan. A commencement certificate also ensures that you do not get swindled into any fraud related to your property investment.
3. Negotiate the Property’s Price
Once you have checked the necessary legal documents for the under-construction project along with the authenticity of the builder’s commencement certificate, it is safe to proceed and make the deal. However, make sure you negotiate the price quoted by the builder. You will be surprised how much money you can save if you approach your builder with a smart negotiation plan. You can include points such as the property’s potential resale value or accessibilities to amenities for price negotiation. If you are successful with your bargain, you might end up saving a few thousands or even lakhs on your investment. This saving could potentially bring down the amount of your home-loan, further bring down the EMIs for loan repayment.
4. Keep a Tab on the Construction’s Progress
It is important that you keep a track on the ongoing progress of the construction after applying for a home loan. It is also advisable that you maintain regular contact with your builder as well as your home loan provider throughout the construction phase. This would help you determine how far along the project has come and whether the disbursal of the home-loan installments is happening as per schedule. If at any point you feel that the project is not progressing as promised, you can instruct your home loan provider to stop disbursing any further installments.
5. Tax Benefits of Home Loan on Under-Construction Property
· One can save up to INR 200,000 under section 80 C of the Income Tax Act.
· After the completion of the construction, tax benefits can be enjoyed up to 5 installments on the pre-construction period interest.
· The tax benefits are not limited only to the home loan amount. You can also avail tax-benefits on stamp duty and registration fee on the unconstructed property.
However, an important point to note here is that these tax benefits can only be reaped after the possession of your property or after receiving an ‘Occupancy Certification’ from your builder.
Make sure that you make proper consideration of all the above-mentioned tips to maximize the benefits of taking a home loan for under-construction properties. Apply for the Bajaj Finserv Home Loan and make your dream home a reality. To learn more, visit Finserv Markets today!
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