Housing finance in Kerala – Beyond home loans

Bank Loans for Housing Finance in Kerala

Are you trying for a housing finance in Kerala and wondering if home loans are the only options? We have some good news for you. In this article we discuss some options for housing finance in Kerala, in addition to home loans, that you can avail of, for the purchase/construction of your dream home.

Just read on…………..

Housing finance in Kerala - Looking beyond home loans

To avail of bank loans for acquiring house property is, no doubt, a prudent decision because of various incentives in regard to Housing Finance. The Government of India always encourage housing sector as it is one of the national priorities to provide shelter to one and all in the country. If a  person waits for accumulating required funds to meet cost of the property which he intends to buy, he will not be in a position to enjoy living in own house during his young age. On the other hand,taking bank loans for acquiring house property in his young age entitles him to the pleasure of owning a property first and then repaying it comfortably by monthly installments.

What are the incentives for availing of bank loans for housing ?

Apart from the one stated above there are at least two more important incentives viz;

  • In the case of real estate, the rate of value appreciation surpasses the rate of money devaluation over a period of given time.
  • Housing being a priority area, Income tax rules envisage various benefits for its loan u/s 24B (deduction of loan interest from income) and u/s 80C (deduction of principal amount repaid ).

Which bank should I choose ?

Once it is decided to avail of bank finance, the next question is as to which bank to be approached. Although generally all banks are inclined to give loans for housing, a market study reveals that HDFC bank and State Bank Of India offer competitive rate of interest (ROI) which is the prime concern for any borrower.

In regard to seamless processing and service we may prefer HDFC bank to SBI; not only that, in HDFC bank the policies and conditions are rather transparent. Moreover, HDFC bank has a separate manager for loan sanctioning.

What are the loans that exist in the market for housing finance in Kerala?

At least some people think that Home loans are the only loans that can be availed of for acquiring a house property, which doesn’t conform to the facts. So, now let’s examine the types of loans available for this purpose.

A) Home Loans in Kerala

It goes without saying that when it comes to house properties in Kerala, home loans is the most advantageous one because of the lower ROI, longer span of repayment allowed and the tax incentives it offers.

In fact, the ROI varies a little from bank to bank-

Broadly, 8.3 % per annum for loans upto 30 lakhs and 8.5 % per annum above that provided the borrower’s spouse becomes co-borrower or else 8.35 % and 8.55 % respectively.

When we come to HDFC bank/SBI the ROI is 8.35 % for women and 8.4 % for others.

Documents required to be submitted for applying for home loans are:

  • ID proof,
  • Proof of residence
  • Photograph
  • Statement of bank account for last six months
  • Statement of personal assets and liabilities
  • Licence issued by the local self governing body
  • Approved plan and estimate etc.

The property is to be equitably mortgaged to the bank. Eligibility factors are income and repayment capacity, income of spouse, assets and liabilities, continuity of occupation and age of the applicant.

Span of repayment which is 30 years maximum will be fixed as upto the retirement or attainment of 60 years whichever is earlier. In the case of income, it is to be noted, the bank will insist for income tax return and fix the eligible amount as four times the gross income as reduced by the amount of Income Tax paid or 80 % of the estimate whichever is less. Generally banks will see the CIBIL Score when a loan application is processed. If the score is below 700, the application is not likely to be considered.

B) Loan against property/Mortgage loan

Another  type of loan which may be considered for housing finance in Kerala is ‘Loan against Property’ or ‘Mortgage loan’ which is sanctioned by banks on mortgage of any land with building.

Span of repayment allowed is 15 years; the eligibility is calculated as four times gross income as reduced by the IT paid or 50 % of the value of property whichever  is less.

Normally, banks charge 1 % Processing fee.

In HDFC bank ROI is 9.8% to 12.5% p.a. If the customer is a valued one, they may sanction the loan at 9.8% p.a. However, most of the banks’ ROI is higher than this. In HDFC bank the minimum age of the borrower must be 24-25 years for salaried individuals whereas the maximum age for professionals is fixed as 65 years. In respect of self employed persons, minimum age of the business must be 3 years.

Apart from the usual income and residence proof and bank statements, job continuity proof and 3 years’ IT return are to be submitted. This type of loan can be utilized for any purpose including housing.Construction contractor in Kerala

C) Personal Loan

Another  type of loan that may be considered for financing housing needs is the Personal loan. Like Loan against property, Personal loan can be utilized for any purpose. Of course the rate of interest when compared to that of Home loan is higher viz;10.99% p.a.(minimum).

Although several banks have stopped Personal loan, HDFC bank still gives such loans on simple documentation such as latest salary certificate apart from other usual documents. Personal loans are given to borrowers in age group of 21-60 years working in private as well as public sectors. The applicant should have been in a job for 3 years out of which 1 year in the current employment. Moreover, net income of the prospective borrower should be Rs.15,000 per month.

D) House Furnishing loan, Construction loan

Apart from the aforesaid 3 types of loans, some banks/institutions give other loans such as  House furnishing loans and Construction loans for housing finance in Kerala. Eg: Some banks give loans for furnishing houses already constructed. But in this case, generally the maximum loan has been limited to Rs.5 lakhs; ROI is around 11.5 p.a.

Similarly,Bajaj Finserve gives Construction loans which is a short term loan sanctioned for construction of building on one’s land. Here,the customer doesn’t get the whole amount of loan at a stretch. The loan amount is disbursed in stages according to the progress of construction.

E) Loan against NSC/KVP etc

Most of the banks give loans against NSC (National Savings Certificate)/KVP (Kisan Vikas Patra) etc on simple documentation. Banks charge ROI hovering around 12.5% p.a. at present. This  amount of loan also can be utilized for any purpose including housing.

Construction contractor in Kerala

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