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I have an ed­u­ca­tion loan and a two wheeler loan and my in­come is R20,000 per month. How much home loan can I get?

—Rakesh Ti­wari Dif­fer­ent banks pre­sume that a cer­tain por­tion of your in­come is avail­able for pay­ment of EMIs of loans. It varies from bank to bank and there is no stan­dard norm/for­mula. Nor­mally, how­ever, the bank will as­sume that around 40%- 45% of your net salary is avail­able for pay­ment of EMI to serve all the loans. Hence, your ex­ist­ing loans will have an im­pact on your loan eligibility and the lender will cal­cu­late the eligibility based on the EMI be­ing paid now and the room left to pay the EMI for the home loan. For ex­am­ple, if the ex­ist­ing EMIs on your ed­u­ca­tional and two wheeler loans are R6000 pm then the bank will I need to buy land worth R15 lakh and build a house im­me­di­ately. The con­struc­tion amount will be around R10 lakh. Can I get loan for both plot and con­struc­tion and can I get tax ex­emp­tions?

—Sailesh Julka You can take a com­pos­ite loan, which is a loan taken for self-con­struc­tion of a house. The loan is given to fi­nance the cost of land as well as cost of con­struc­tion of prop­erty on the plot. The bank will re­quire doc­u­ments such as proof of in­come, identity, res­i­dence for the home loans and doc­u­ments re­lat­ing to ti­tle of the prop­erty be­ing pur­chased. You will have to sub­mit an es­ti­mate of the to­tal cost of con­struc­tion, cer­ti­fied by an architect/civil en­gi­neer. The amount you paid for the plot or the cur­rent mar­ket value, which­ever is lower, will be taken into ac­count to work out the to­tal cost of the project pro­vided you com­mence the con­struc­tion within a rea­son­able time af­ter pur­chase of the plot. The bank will de­ter­mine the home loan amount based on the to­tal cost com­pris­ing con­struc­tion cost and cost of the plot. The loan will be re­leased in parts, based on the progress of the con­struc­tion, and af­ter you have brought in your full con­tri­bu­tion. The bank may in­sist on send­ing its own technical per­son­nel to as­sess the progress of con­struc­tion or may rely on cer­tifi­cates/pho­to­graphs sub­mit­ted by you. Some banks are not com­fort­able fund­ing self-con­structed prop­er­ties. I had taken a home loan from Stan­dard­Char­tered Bank in 2004. I am told now that pre­pay­ment charges on the out­stand­ing loan amount are ap­pli­ca­ble. Do Ihave to pay for fore­clo­sure?

NHB (that reg­u­lates

Mithilesh hous­ing fi­nance com­pa­nies such as HDFC Ltd, LIC Hous­ing Fi­nance, etc) had is­sued a cir­cu­lar on do­ing away with pre-clo­sure charges if paid from own source. There are cur­rently no RBI reg­u­la­tions / in­struc­tions in this re­gard. There­fore, banks are free to charge the pre­pay­ment charges. A lot of banks, though, do not charge pre­pay­ment charges from own sources. You need to check your loan agree­ment copy to as­cer­tain whether the fore­clo­sure be­ing charged is as per the agree­ment.

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