Home Construction Loan

A home construction loan is secured by mortgaging the property on which the renovation or restoration or additional construction is planned. For example, if you want to increase the size of your home and add another room, storey, or backyard to your existing property, you can utilise a home construction loan to fund the project.

Home Construction Loan Interest Rates

The starting interest rates at which top Indian lenders are willing to provide a home construction loan are as follows:

Disclaimer: The interest rates mentioned above are subject to change owing to forces internal or external to the lender. You must always check the current interest rates with the lender of your choice before applying for a home construction loan.

Top Banks for Home Construction Loan

Here are some of India's major banking institutions that provide home construction loans:

• ICICI Bank: ICICI Bank offers home construction loans with interest rates starting at 7.60% per annum for a 30-year term. There are no prepayment penalties on house loans with a floating rate of interest. With an ICICI Bank home construction loan, you can also acquire overdraft and top-up loans.

• PNB Housing Finance: PNB Housing Finance offers a construction loan with an interest rate ranging from 6.99% to 10.15% and a 30-year term. PNB Housing Finance levies a processing fee of 1% on a house construction loan. The PNB loan is available to both Indian residents and non-resident Indians. Prepayment of house construction loans from PNB Housing Finance is also free of charge and penalty.

Home Construction Loan Features and Benefits

Any borrower who wants to build a house on his plot or an additional floor on his property might profit from a home construction loan.

• Long tenure: The home construction loan is available for extended periods of time, ranging from 5 to 30 years, implying that the EMI burden on the borrower is low and the loan is cheap.

• Taxation benefits: Construction loans, like home loans, are eligible for a tax deduction on the principle and interest paid under Sections 80C and 24B. Sections allow for a tax benefit of up to two lakh rupees on interest and Rs. 1.50 Lakhs in principal. Sec 80 EE allows first-time buyers to claim an extra tax advantage of up to Rs. 50,000.

• Balance transfer service: Most banks offer housing loan balance transfer options for house construction loans, just as they do for home loans. If a borrower discovers that his current rate of interest on a loan is greater than the market rate, he can transfer the outstanding balance of his loans to another bank by paying balance transfer processing fees of up to 1%.

• Refinancing a mortgage: You can also acquire a top-up loan as a home construction loan on your existing home loan. Banks look at your repayment history to see if you're eligible for a construction loan to supplement your current loan. Banks may impose processing costs for offering home loan top-up in some situations.

• Loan Amount: The amount of a home construction loan you can acquire is determined by your income and repayment eligibility. Construction loans are available up to 90% of the property's value. You must add a co-applicant for the loan to improve your loan amount eligibility.

Home Construction Loan Eligibility Criteria

The home construction loan eligibility criteria you must satisfy as a salaried or a self-employed professional are as follows:

Disclaimer: Please check with the lender before applying.

Documents Required for Home Construction Loan

If you are a salaried/self-employed applicant who is applying for a home construction loan, you will need the following documents:

1. Documents for Salaried Employees 

• Proof of Identity: Aadhar Card and a valid passport

• Proof of Residence: Valid passport and a Voter ID card

• Proof of Income: Income Tax Returns and latest Form 16

• Property Related Documents: Encumbrance Certificate and the title deeds of the plot

2. Documents for Self-Employed

• Proof of Identity: Voter ID card and a valid driving licence

• Proof of Residence: Aadhaar card and utility bills

• Proof of Income: Income Tax Returns, as well as the applicant's and business entity's income computations for the previous three assessment years.

• Property Related Documents: Title deeds of the plot and estimate for construction assessed by a civil engineer.

How to Apply for a Home Construction Loan

To apply for a home construction loan, you will have to:

• Step 1: Click on the ‘Apply Now’ button on the application page of the lending institution.

• Step 2: Select the type of applicant that you are (Salaried/Self-Employed). Post which, enter your mobile number and date of birth. To complete this step. Click on the ‘Check Your Offer’ button.

• Step 3: On the next page, you will need to fill in your basic professional details along with your monthly income. Click on the ‘Enter Personal Details’ after you do the needful to proceed.

• Step 4: On the following page, feed in details such as your Gender, Marital Status, PAN Number and Personal e-mail ID.

• Step 5: Choose your loan amount and repayment tenure. Finally, submit the application.

Once you submit the application, all you will need to do is wait for an executive representing the lender to call you to take things further.

Is a Home Construction Loan Different from a Regular Home Loan

Yes, a home construction loan is different from your regular house loan in many ways. The differences are as follows:

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