Home Construction Loan

A home construction loan is secured by mortgaging the property on which the renovation, restoration, or additional construction is planned. For example, if you want to expand your home and add another room, storey, or backyard to your existing property, you can utilise a home construction loan to fund the project. The interest rates of home construction loans are considerably low, starting at 6.95% p.a.

Any borrower who wants to build a house on his plot or an additional floor on his property can benefit 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 burden of EMIs can be lowered.

• Tax benefits:With construction loans, you are eligible for a tax deduction on the principal and interest paid under Sections 80C and 24B. These sections allow for a tax benefit of up to ₹2 Lakhs on interest and ₹1.5 Lakhs on principal, respectively. Sec 80 EE allows first-time buyers to claim an extra tax deduction of up to ₹50,000.

• Balance transfer service:Most financial institutions 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 lender by paying a nominal processing fee.

• Loan Amount:The sanctioned amount of a home construction loan is determined by lenders after taking your income and repayment capabilities into consideration. Construction loans of up to 90% of the property's value are available. Having a co-applicant can improve your chances of getting a higher loan amount.

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

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

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: Aadhaar 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.