Construction of house on a piece of land is a dream of every Individual. This dream is shattered when reality of amount of money required to build a house comes into picture. Further, the matter gets more complicated since its not easier to get home construction financed from the bank. But, if you are ready to bear the nuisances of home construction loan process below the few tips on home construction loan which will prove beneficial for you
Here are some tips on home construction loan on a self-owned land:
The ownership or the title holder of the land is of utmost importance. The land could have been acquired by purchase from a developer, or an independent land-owner or could have been inherited from ancestors. (a) The land, if purchased from a developer and is in a gated community with basic facilities already developed like electricity and water connection, leveling of ground, roads laid, proper earmarking etc., then the funding is easy than that of an independent parcel of land. Lenders prefer gated community. (b) A solitaire parcel of land should have all statutory clearances from government and local town-planning authority and should also not be an agricultural or commercial in nature. The land should not be in green zone. If so, funding will not be possible under standard home loan criteria. (c) A land which is inherited can have various issues like joint holding with siblings which may not be acceptable by lenders, such as with married sisters or brother who is abroad and do not wish to come into the loan etc. You must check this out before planning up. (d) Land owned by trust, educational institutions, temple, church etc. will have conditions attached and no lender will be interested in funding with clauses
The Loan to Value ratio:
This is most important among all the tips on home construction loan. In case there is no other loan on the land, the bank can provide loan upto 100% of land value. Further, banks calculate the value using their own methodology which is closer to market prices and not on the government land rates in India
Installment based funding:
This is the trickiest part, the financing will be done in tranches by bank or one can say its same as construction linked plan in case of a flat. That means once you complete, say 25% of the construction, a 25% of the loan amount will be released. In case amount released is in advance, a valuation report is prepared which highlights that the disbursed sum has been utilized towards construction and the progress is satisfactory, after which the next tranche’ will be disbursed
Map approvals from municipal corporations or the relevant town-planning authority is a must. An estimate by the contractor will have to be submitted too on the architect’s letterhead. The tax payment on the land will have to be up-to-date.
Disbursal of funds:
The funds are disbursed at the personal account of the landowner-cum-borrower. In case, land is in father’s name and the loan is sanctioned based on son’s income the funds will be disbursed to son’s account i.e. the funds will be disbursed to the person’s account whose account will be debited towards EMI payments
Hope the above tips on home construction loan helps you realize your dream of constructing your home. Further, these tips on home construction loan should be supplemented by through review of the current offerings from the banks.
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