Easy Way to Opt a Home Construction Loan in India

As per the reports released by the Housing Finance Companies (HFCs), an average of Rs.25,000 crore home loans have been disbursed in the 4th quarter of the year 2018. In the 3rd quarter of the financial year 2019, a 14% growth of interest rate has been witnessed on a year-on-year basis. Subsequently, on a quarter-on-quarter basis, a growth rate of 3.5% has emerged. The last 5 years have compounded annual growth of 19% in the housing sector loan.

Owing to the increased demand for houses particularly construction of houses on a vacant plot, financial institutions have made available home construction loans. This secured loan allows diverse expenditures to be easily covered without any hassle.

Home loans are easily accessible financing options in India. Nonetheless, in order to get an instant approval for such a loan, specific guidelines are to be followed.

Eligibility to get a construction loan for a home with ease

Fulfilling the following essential factors increase the prospective borrower’s chances of approval of home loan-

• Age bracket- Salaried individuals should be at least 23 years old and not exceed 62 years of age. For self-employed individuals the age-bracket considered is between 25 and 70 years.
• Credit score- A clean credit history is essential for easy approval of a loan. A CIBIL score of 750 is considered to be ideal to avail a home loan. This ensures the financial institutions of the borrower’s repayment capability. Default payment can be avoided if the EMI calculator is used by the borrower.
• Occupation- The individuals must either be self-employed or salaried with a regular source of income. Salaried applicants must have a minimum of 3 years of work experience. Self-employed individuals should complete at least 5 years of business.
• Income- In general, salaried individuals should have at least Rs.20,000 as monthly income in towns and cities. In metro cities, a minimum salary of Rs.25,000 is required to avail home loans. Applicants can select their home loan repayment options based on their eligible income made available by the financial institutions.
• LTV- Loan amount is provided in accordance with the market value of a property. If the maximum down payment is made against the construction loan interest rate, a home loan can be availed quicker.
• Documents- Property documents, identity proof including PAN card and Aadhaar card and address proof should be provided for instant approval of the loan. Salaried individuals should provide Income proof including Form 16 and self-employed individuals should present their financial statements.

It is advisable to check your eligibility via a home loan eligibility calculator before availing the loan.

Additionally, an applicant can enhance his eligibility by abiding by some set features-

How to boost your eligibility?

• FOIR- Unpaid dues such as credit card bill payment in addition to any outstanding debts including loan EMIs should be paid off. It will lower your fixed obligation to income ratio (FOIR), thereby turning you eligible for a home construction loan.
• Tenor– EMIs reduce with increased tenor, however the total interest payable increases. Applicants should opt for an ideal tenor that maintains a balance between EMI payments and the interest payable.
• Interest rate– Applicants are free to choose their housing loan rate between fixed and floating. Fixed-rate of interest leads to fixed EMIs to remain constant throughout the tenor whereas the floating rate of interest changes in accordance with MCLR.
• Loan amount– As per the RBI guidelines for a home loan, LTV for housing loans can range between Rs.35 lakh and Rs.75 lakh. While availing home construction loans, the number of loans should be considered. Higher the amount of loan, the lengthier will be your tenor for a loan against property.

Several financial institutions provide flexible tenor for ease of availing home loans. Bajaj Housing Finance Limited is one such institution which offers flexible tenor ranging from 2 to 20 years for the convenience of the consumers.

Availing home construction loans becomes a struggle if the individual is ignorant of the eligibility factors. Following the factors listed above will reduce the hassle and time involved in procuring the loan.