A
property often requiresrenovation and repairs from time to time, and if anyone
is going through a financial crisis, they may need to postpone their plans
owing to such financial setbacks.That’s when home construction loans come into the
picture.
Housing
construction loans are short term home loans availed by individuals for
construction or renovation of the property.Financial institutions or housing
finance companies may disburse the funds directly to the contractor instead of
the borrower depending upon the policies of the organization.However, one
should take a few things into consideration before you get a home construction
loan.
5 tips to avail
property construction loan
·
Eligibility
criteria of hom construction loans
A
financerapproves construction loans after evaluating the eligibility criteria
of the applicant. One can also check his/her eligibility via home loan eligibility
calculator from trusted websites.
Some
of the eligibility factors to have a construction loan approved are listed
below –
1. Involvement of a licensed
builder: An individual should always go to a
licensed builder for home construction purposes. A valid license of the builder
and association of the builder with a reputed organization facilitates loan
disbursal.
2.
Availability
of certificate of commencement: An applicant of
home construction loan should never get carried away by attractive brochures or
just marketing from the builder. The applicant must have a proper agreement as
well asacertificate of commencementfor protectionagainst legal problems which
may come up without warning.Also, it helps the borrower to qualify for a property
construction loan.
3.
Availability
of detailed specifications to the loan provider: The
lender needs to have all the details of the property such as floor plans, list
of materials to be used for construction purposes, along with the blue book for
loan eligibility.
·
Documents
required
For
a quick loan approval, an individual should provide valid documents. The lists
of documents required for a construction loan mentioned below –
1. Proof
of unique identification – Aadhaar Card, Driving License, PAN, and Voter ID
Card.
2. Residential
proof – Electricity bills and telephone bills, etc.
3. Income
statements details – Salary slip and bank statements.
4. Property
documents – certificate of commencement, blue book, an agreement between
contractor and applicant.
5. An
applicant also needs to provide a cancelled cheque to validate his bank
account.
·
Salient
features and benefits of construction loans
1. Flexible repayment
tenor:Top housing finance companies providehome
construction loans with flexible repayment tenor. One can make part prepayments
or prepay the entire amount of credit according to their convenience.
2. Quick loan
disbursement: Enjoy fast and seamless loan
disbursement procedure for construction loan provided one has valid documents
and a good credit score.
3. Tax benefits on
construction loan: An individual can claim
home loan tax benefits for under-construction properties under Section 80C,
80EEA, and Section 24(b) of the Income Tax Act,1961.
4. Nominal rate of
interest: Construction loan interest rates are
nominal compared to other unsecured loans.
·
How
construction loans differ from home loans?
Although
construction loans may appear similar to home loans, there is a difference
between home loans and property construction loans. Some of them are listed
below –
·
Purpose
of loan: An individual avails home loans to
purchase a property whereas the use of construction loans is solely for
construction or renovation of the property.
·
Payment
disbursal procedure: The whole home loanamount
is a one-time disbursal process. In construction loan,disbursals are made in
the form of instalments according to the progress of construction.
Availing
home construction loans are beneficial as they are secured, and disbursals of the
loan amount are made in instalments. One should be aware of all the terms of
the loan and plan in advance to avoid any hindrance during the loan tenor.
