This article provides you with the details regarding the criteria you need to meet to be eligible to apply for property loans. Also, we will address the home loan disbursement process for under construction property and loans provided for commercial properties.
An Outline on Property Loans
Many investors or beginners trying a hand at the real estate market often face capital crisis due to which they are unable to expand their investment horizon. Therefore, to counter their crisis they try an alternative method to get a sum which they could invest as capital for gaining a property. This alternative way is the process of applying for loans to buy or invest in real estate properties.
Several banks offer home loan plans and commercial property loan. However, all of them come with hefty interest rates to be paid to repay the loan amount borrowed. Thus, to avoid falling victims to heavy interest rates, there are many factors which you as a lender or borrower should keep in mind. We will give you an account of these descriptions in the article below.
Sometimes, property loans are also considered to be a loan which is taken against a property for funding various needs. In such cases, property or land acts as a security or a collateral asset that is mortgaged with banks or any financial institution to provide you with a loan amount. This amount can be used for meeting any personal needs such as funding your child’s education needs, hosting a wedding, expanding your business and so on.
You should meet the following criteria to be eligible to apply for a home loan:
- You should either be a salaried employee or own an effective business.
- Your monthly income should be substantial that would allow you to pay the EMIs on time along with having sufficient amount for your monthly expenditure.
- Your current EMIs (if any)
- You should have a good credit score history if you have taken credits in the past.
- Your credit limit and the number of credit cards owned by you.
Loans Are Taken For Under Construction Properties
Being a relatively cheaper option to invest in, nowadays many investors prefer investing in properties which are under construction. This is because under construction properties provide you with options such as benefits of tax exemptions, prices are 20% cheaper than fully constructed properties, plenty of loans available with better EMI plans. Here are some of the factors to keep in mind for investing in under-construction properties:
- Make sure you choose a certified builder – This implies that you should ask for a legal document such as a validation certificate of the builder of a property you are planning to invest in. This would not only assure you that the builder is genuine but also will prove that the property will not have to face any legal issues in the future.
- Negotiate as much as you can – Seek help and guidance from local real-estate planners to learn the market dynamics and the ongoing rates trending in the realty sector. This way you can acquire knowledge regarding the prices of property and negotiate for a better price. Many a time, builders pose heavy prices on properties but you should always try to negotiate and bring it down.
- Check out for lenders – Look for lenders having a better knowledge of property analysis if you are planning to raise capital from acquiring a loan from banks or other financial institution. This will not only help you make a better investment plan but also educate you on the EMIs tenures and payments of interests.
- Monitor the construction program – You must be well-aware of the constructions taking place and the progress in the development program. Keeping in touch with both the builder as well as the lender is important for effective disbursement of loan and for keeping an eye on the construction progress.
Home Loan Disbursement Process For Under Construction Property
- Home loans taken for investing in under-construction properties are disbursed in portions, that is, as and when the builder demands payments from the investors for continuing the on-going constructions at the site.
- Many home loan procedures come with EMI charges on the amounts disbursed, hence charging you with lower monthly instalments having reasonable interest rates.
- However, some may also charge you with EMIs on the entire amount of loan applied for even if you have only used a portion of it.
- Tax benefits are applied only on the amount of the interests paid in five equal EMIs when the property is under construction.
List of <Bank Name> Property Loans + Rates
- AxisBank charges a 7.70% floating interest rate on a loan of rupees 10 lakhs for 20 years. Therefore, the monthly EMI comes to rupees 8,178. Processing charges are up to 1% i.e. a minimum of rupees 10,000.
- ICICIBank’s floating interest rates fall between 7.45% – 8.45% for the same amount and same tenure. The processing fee is charged at 0.50%.
- HDFCBank provides the same amount at 7.35% floating rate of interest for the same amount and same tenure. The processing fee is rupees 3,850.
Q1. What are the things to look for before applying for a property loan?
Ans. The loan amount along with the tenure for the repayment of EMIs and interest rates charged on it.
Q2. Which is a better investment option, House Loan or Commercial Property Loan?
Ans. Based on your investment horizon and expectation of income you can go with either of the options.
Also read : Home Loan Transfer Process: Know all the details