How to Get Home Construction Loan in India | Brick&Bolt
Feb 08 2023
The joy of constructing your dream house is unparalleled. But the increasing construction expenses may make your dream of building a house uncertain. Although people can obtain a home construction loan to build their homes, the approval and disbursement processes differ from those for ordinary home construction loans. In addition to borrowing money to buy a ready-to-move-in house or book a property currently under development, you can use a home construction loan to get a house constructed on a plot. These loans, frequently referred to as construction loans, are offered by all of India's top financial institutions.
However, one should remember that home construction loans differ from home loans and plot loans. These three different loan types have varied terms and conditions and different prices. Additionally, the repayment tenure varies from one loan to the other. In this blog, we will give you all the necessary information regarding home construction loans in India so that it becomes easier for you to apply for a home loan anytime.
Home Construction Loan
A home construction loan is a form of short-term finance that can be used to pay for all the expenses involved in constructing a house. It is a specific kind of loan that enables customers to get the money they need to finance the building of a residential property on a plot of land. Loans for construction may be used to pay for the price of purchasing property, creating blueprints, obtaining permissions, and paying for labor and supplies. If your project costs more than anticipated, you can also use a home construction loan to access contingency reserves or interest reserves if you don't want to pay interest while the house is being constructed.
Advantages of Home Construction Loan
The primary advantages are outlined below:
Tax Benefits: Home construction loans offer great tax benefits if you want to build a new house. The borrower may be eligible for tax exemptions and deductions under sections 80 C and 24 (b) on principal and interest payments.
Instant Equity: One can immediately create equity by constructing a house. If a person invests in a savings plan or fixed deposit, it could take up to 10 to 15 years to build up any equity. However, when constructing a house, they can produce value more quickly and on a greater scale.
Balance Transfer: You can transfer the remaining debt from one form of loan to another with a reduced interest rate by using balance transfer loans. A balance transfer helps to pay off the debt more quickly and saves money on interest fees.
Top-up Loan: An additional loan that can be placed on your current house loan is called a top-up loan. It can be used for various things, such as house renovations, debt relief, or other significant costs. To improve the loan experience, banks are providing top-up loans on their home-building loans.
Documents Required for Home Construction Loan
When applying for a home construction loan, you need to submit some documents to the lender. Specific documentation may be required depending on the applicant's profession, financial situation, and place of residence. The documentation needed for house building loans varies in several ways depending on whether the applicant is salaried or self-employed.
Documents required for self-employed people
Lenders will demand certain documentation from self-employed people to evaluate the profitability and legitimacy of your business. When you're ready to apply for a loan for home construction, you must include the following paperwork:
Bank records for the recent six months
Last three years' Profit & Loss projection statement
The processing fee cheque was drawn from your business account
Business commencement registration certificate
Your company's information on the letterhead
Income tax returns for the past two years
Documents required for salaried people
Lenders must confirm applicants for salaried positions have a steady source of income and verify their employment with a legitimate public or private organization. Salaried people must therefore produce the following paperwork in addition to the documents mentioned above when applying for a loan for home construction:
A photocopy of the salary account bank statements for the previous six months is acceptable as proof of income.
The processing fee cheque was drawn from the salary account
A copy of the salary slip
Form 16 Salary Slips for the last three months, certified accurate copy
Annual increment letter