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.
Home loans for under construction properties will help you complete the construction of your dream house. These homes can either be built by a contractor hired by you or a reputed builder. In many ways, home loans for under-construction properties can prove to be a better option as compared to a regular housing loan.
Below mentioned are 5 tips on home loan for under construction projects that can help in this planning:
1. Do Your Research: Ensure that your property of investment is actually profitable. For that, it is advisable that you research 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.
2. Check Builder’s Commencement Certificate: 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.
3. Negotiate Property’s Price: Once you have checked the necessary legal documents for the under-construction project it is safe to proceed and make the deal. However, make sure you negotiate the price quoted by the builder. You can include points such as the property’s potential resale value or accessibilities to amenities for price negotiation. This saving could potentially bring down the amount of your housing loan, further bring down the EMIs for loan repayment.
4. Keep a Tab on Construction’s Progress: It is important that you keep a track on the ongoing progress of the construction after applying for 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 instalments 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 instalments.
5. Tax Benefits: You can claim tax benefits for repaying your under-construction home loans too. You can claim a tax benefit of up to ₹2 Lakhs on the interest component of the loan while an additional ₹1.5 Lakhs on the principal amount under Sections 24B and 80C of the Income Tax Act of 1961, respectively.
Some of the defining features and benefits of such a kind of loan are:
Lower EMIs: Under-construction home loans are disbursed in instalments since they are given on the basis of the construction stage of the property. Here, the interest is only charged on the disbursed amount, which means lower EMI amounts for the borrower.
Flexible Repayment Tenure: Under-construction property loans can be repaid over the course of 30 years. But note that this can vary from bank to bank and as well as the borrower’s eligibility.
Attractive Interest Rate: The interest rates that under-construction property loans attract are generally lower than that of your typical housing loan. A good credit score can also help you bring down your applicable interest rate even further.
Lower EMI Amount During Initial Years: Until you get possession of the home, you will only have to repay the interest component of the loan. This translates to lower EMIs during the pre-possession period.
1. Bajaj Housing Finance Home Loan for Under-Construction Property:
Interest rates start from 8.50% per annum for salaried employees
9.25% per annum interest rate for self-employed applicants
Loan funding of up to ₹5 Cr
Borrower can avail up to ₹1 crore as top-up during course of the tenure
Loan disbursal happens within 48 hours
Zero prepayment and foreclosure charges
2. ICICI Bank Under-Construction Property Loans:
Interest rates start at 9.00% per annum for salaried employees
9.00% interest rate for the self-employed applicants
Funding of up to ₹3 crore can be availed
The loan can be repaid over a period of 30 years
Opening Money Saver account will reduce interest rate and overall home loan EMI
3. PNB Housing Finance Under-Construction Home Loans:
Interest rates start at 8.50% for salaried employees
8.80% interest rate for self-employed applicants
Funding of up to 90% of the property value can be availed
Loan can be repaid over the course of 30 years
Processing fee ranges between 1-2%
PMAY beneficiaries can receive an interest subsidy on this loan
Loan is covered by home loan insurance so that the burden of repayment does not fall on the family members of the family if he/she dies
Make sure that you make proper consideration of all the above-mentioned tips to maximise the benefits of taking a home loan for under-construction properties. Apply for Home Loan and make your dream home a reality. To learn more, visit Bajaj Markets today!