I have ₹ 25 lakh in hand and would like to buy a house for about ₹ 45 lakh. I earn ₹ 3.5 lakh annually. Also, the building in which I want to buy the flat is 20 years old. What should the EMI be if I borrow the difference amount?
—Subir Malik Banks can finance only up to 80% of the agreement value of the property. If you are below 40 years of age, you should be eligible for around four to four-and-a-half times your gross annual income as loan, provided you have no other loan to service subject to 80% of the property agreement value. With an annual income of ₹ 3.5 lakh and assuming you have a good repayment track record on loans and credit cards (if any) you will be eligible for a loan amount of approximately ₹ 14 lakh to ₹ 16 lakh for a tenure of 20 years at an interest rate of 10.25% per annum.
Hence, for a property worth ₹ 45 lakh, the bank can lend up to ₹ 36 lakh, but since you are eligible for only ₹ 15 lakh, the balance amount of ₹ 30 lakh will have to come from your own sources. Additionally, you will have to contribute towards stamp duty and registration charges from your own sources of funds. You can take a joint loan with your earning spouse/parents/children to increase the loan eligibility.
The age and the condition of a building has a bearing on loan eligibility. Banks are normally reluctant to lend for a property which is very old. In your case, if the property is 20 years old and if it is in good condition, you should not have any problems in getting a loan from any bank. Most banks get the property valued independently and they will provide the loan based on their valuation rather than the value mentioned in the purchase agreement. The valuation as determined by the banker’s valuer is significantly lower than the actual cost and hence your effective down payment can go up. Please note that the residue age of the building based on technical evaluation should be more than the tenure of the loan sought by you.
I am planning to buy a residential plot and the construction may take another two to three years. Can I get a home loan for the property?
—Arvind Aggarwal We are assuming that you mean that the construction will start immediately but will be completed in two to three years. If so, you can get a composite loan, which is taken for self-construction of a house. The composite loan is considered at par with a home loan for the purpose of eligibility, rate of interest, tenure of the loan etc.
The loan is given to finance cost of land and cost of construction on the plot. The banks will require documents in respect of 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 cost of the plot to you 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 selfconstructed properties and hence, you will have a narrow choice as far as number of lenders are concerned.
Harsh Roongta is CEO, Apna Paisa. He can be reached at firstname.lastname@example.org property should read the original lease deed to determine the original status of the property.If the lease deed does not have the transfer clause we will also not recognise it.”
Surprisingly, the revenue department seemed indifferent to the plight of the homebuyers stuck with transfer deeds. Asked why the department was col- lecting revenue for documents which do confer property ownership rights on buyers, Dharam Pal, secretary (revenue) says, “We are concerned about revenues. It’s the duty of the people to go through the documents before getting them registered. People should buy property through transfer of lease deed only if the deed has a clause which allows such transfer. The sub-registrar can’t make such a distinction.”