Home Loans for Under-construction Property

It is no news that real estate prices are high and for a middle-class individual it has become imperative to take home loan to fund the purchase. Since it is a huge financial commitment, you need to make a wise decision about the property you are buying as well as the home loan. With a number of projects coming up at a rapid pace, under-construction homes are rising as a preferred choice among mid-segment buyers. These are priced lower than the ready-to-move homes so you can get the combined benefit of a good location as well as better home at a reasonable rate.

Home loans for under-construction projects are offered by all popular banks and financial institutions. 

Let’s talk about a few such home loans-

ICICI Bank Home Loan

ICICI Bank Home Loan is one such product that helps people own the home of their dreams at attractive interest rates along with easy terms and conditions. ICICI Bank is one of the first tech-savvy banks of the country. One can also apply through their smart phone application and ensure faster approval. They also claim to provide higher eligibility and smart EMI options. One’s eligibility is judged on the basis of various parameters like current age, retirement age, monthly income, existing EMIs, etc. ICICI Bank Home Loan EMIs can also be calculated with the EMI calculator available on their official website. ICICI Bank offers a competitive interest rate along with a maximum tenure of 30 years which will make repayment smoother for the borrowers.

SBI Home Loan

SBI is one of the most preferred home loan lenders of the country. The bank offers home loans for under-construction property, ready-to-move homes and resale homes as well as for construction of a home. The loan amount is decided on the basis of the applicant’s credit history and repayment capacity which is judged by his income, expenses, age, job stability, existing EMIs and a few other things. For properties priced up to Rs 30 Lakhs, 90% of the value can be given as a loan; for properties ranging between 30 Lakhs and 75 Lakhs, the ratio is 80% and for those exceeding Rs 75 Lakhs, the loan percentage is 75%.

Given below are a few benefits of SBI Home Loan-

·         No additional or hidden charges

·         Complete package of exclusive benefits

·         Interest rates charged on a daily reducing balance

·         No prepayment penalties

·         Low processing fees

HDFC Home Loan

Originally a housing finance company, HDFC is also counted among the best home loan lenders. It offers attractive interest rates on home loan that can be taken for the purchase of under-construction property, resale property or for constructing a home on the plot. HDFC also offers loans for extension or renovation of a house. The terms and conditions of HDFC Home Loans are very simple after one meets the eligibility criteria. Both fixed and floating rates of interests are provided on these home loans. Being a smart bank with updated technology, the home loan approval process with HDFC is quick and easy.

Comparative Interest Rates

The table given below shows the home loan interest rates offered by these three lenders to salaried individuals. Take a look-

	Up to Rs 30 Lakhs	30 Lakhs to 75 Lakhs	Above 75 Lakhs
ICICI	8.40%	8.65%	8.70% to 8.80%
HDFC	8.40% to 8.90%	8.50% to 9.00%	8.55% to 9.05%
SBI	8.40%	8.55%	8.70%

Tax Benefits on Home Loans for Under-construction Property

Apart from being cost-effective, investing in under-construction properties through home loans can also give you certain income tax benefits. Under Section 24B, an individual can claim a deduction of Rs 2 Lakhs towards the interest paid on home loan for a self-occupied property. However, if the property is not self-occupied or rented out, there is no maximum limit and the whole interest amount can be claimed for deduction. From financial year 2016-17, more tax benefits are allowed to first-time homebuyers towards interest paid on home loan under section 80EE; the deduction allowed is Rs 50,000 over and above the 2 Lakh limit.

All You Need to Know about Pre-Approved Home Loan

Your home-buying journey begins the moment you start making mental notes about how your dream home would be. There are many stops where your train will halt- comparing different localities and builders, finding the home with right amenities and deciding on the property that meets all your requirements. But what if you go to a bank for getting a home loan for this purchase and the approval process takes forever. You are at the risk of losing the house as the builder might sell it to someone else, if your funding process takes too long. The best way to avoid this situation is to geta pre-approved home loan before stepping out on a home-hunt.

What is a pre-approved home loan?

It is basically an in principle approval for a home loan given by a bank based on your credit profile. A number of banks offer this facility. For example, SBI has rolled out a pre-approved home loan facility under the name SBI PAL. It provides sanction of home loan limit before finalizing the property. The customer will have to meet SBI home loaneligibility criteria and the bank will judge the credit profile based on income and credit history.

What is the procedure of getting a pre-approved home loan?

Banks offer pre-approval on home loans so that the homebuyers can search for their dream home with confidence. Following procedure is adopted by most of the banks for giving out a pre-approved home loan-

·        

 Firstly, you have to apply for a pre-approved home loan with the bank- either offline or online, though the online option is not offered by all banks. At this point, you will also have to submit the required KYC documents and proofs of your income.

·         Based on the furnished documents and your CIBIL score, the bank will ascertain your repayment capacity and decide the amount that can be sanctioned to you.

·         Next, the bank will issue a loan sanction letter to you which will be valid for a definite period of time, in most of the cases it is 4 months or 120 days. Other terms and conditions of the loan will also be mentioned in the letter. The interest rate mentioned in the sanction letter will be decided according to the prevailing market rates and is also subject to change.

·         The bank will also charge a processing fee which will be non-refundable. If you do not take up the offer within the stipulated time, the amount paid as processing fee will be forfeited.

·         Once you select the property (before the specified time period), you will have to submit property documents with the bank. When satisfied with the papers, the loan amount will be disbursed by the bank.

Benefits of Pre-Approved Home Loans

Pre-approved home loan helps you search for your dream home with confidence as you don’t have to worry about the finances. Given below are a few more benefits of pre-approved home loans-

·         Firstly, pre-approval gives you peace of mind and helps in planning your finances. It gives a clear view of how much you can afford and borrow so that you do not have to regret later and toss the decision altogether. If the home loan falls short, you have enough time to arrange funds from other sources to fill the gap.

·         While searching for a house, builders also prefer buyers who already have a home loan at hand. So you will have an edge over other buyers.

·         Since all your documents have been already scrutinized by the bank, loan processing and disbursal will be a quick process, unlike normal home loans.

·         Most of the banks use pre-approved home loans as a promotional measure; therefore, you have a higher chance of getting discounted rates.

Conclusion

Pre-approved home loans definitely bring a certainty in your home-buying journey. However, issues like definite validity period, risk of losing the processing fee, etc. might leave you in a muddle. It is advised to shortlist a few properties and evaluate your personal finances and then apply for a pre-approved home loan. This will give you a clear view of the amount you can borrow from the bank and at the same time you will able to choose the right property from the shortlisted ones, well within the validity period.