UNDERSTANDING IT BETTER

Not many of you would know that banks currently account for more than two-thirds of total home loans disbursed in the country. The home loans in India are provided by banks (for them, RBI is the regulator) and housing companies (National Housing Bank [NHB] is their regulator). From time to time, these regulators issue guidelines governing home loans in India. As the name suggests, home loan is taken for either purchasing or constructing of a house/residential property. One can also avail of a housing loan to buy a plot of land and carrying out construction on the same – this is called composite loan. Home loans in India are provided by the lenders up to a maximum of 80 per cent (90 per cent for loan amount below Rs 20 lakh) of the agreement value of the house. In case of home loan for resale of flats, most lenders get the property valued independently and they will provide the housing loan based on their value rather than the cost mentioned in the purchase agreement. Frequently, the valuation is determined by the banker's evaluator. Banks do not consider other charges like stamp duty and registration charges, and these costs have to borne by the borrower. Home loans are repaid through monthly instalments (EMI) spread over up to 20 years. Some banks have increased the tenure up to 25–30 years. The maximum tenure of any loan and home loan specifically is also restricted by the borrower’s age at the end of the tenure so as to ensure that the loan gets fully paid by or before the borrower’s retirement age.