Thinking about constructing a home on the land you own? If yes, then need not to worry about the financial funding as the Home loan segment is here for help. Wait and read these lines before thinking that a home loan can only be availed to purchase a ready-to-move-in property or for buying of a residential property that is under construction. In fact, now it’s time to say cheers as you can get financial assistance from a bank or any other financial institution for construction of a home. So, here are the things to remember while applying for a construction loan which you must know:
- Home Loan alias Construction Loan
The Construction loan is different from a home loan as you are required to produce details of land, purchase date of the land, from whom the land is purchased and some more details. The loan availed for the building of a home alias construction of an independent home on a piece of land acquired by you is known as the Construction loan where getting a financial funding to buy a home on someone else land is known as a home loan.
- Who Can Apply for Construction Loan
A person can avail this loan only if he/she is constructing a home him/herself or in case you hire a contractor to get a home constructed.
- List of Documents Required for Application of Construction Loan
- KYC – Know Your Customer
- Income Proof
- Proof of Land Title Ownership
- Allotment Letter from the Authority from whom you purchased land/plot like DDA, CIDCO
- Non-Encumbrance Certificate
- Plan of the Proposed House approved by Municipal Corporation
- Layout of the Proposed house approved by Municipal Corporation
- Construction Cost likely to be incurred for building of the proposed home which should be approved by a civil engineer or an architect.
The loan will be approved by the bank or financial institution only if the lender is satisfied with the documents produced by you. The lender then checks if the applicant can payback the sanctioned amount in the given timeframe. Remember that the approval of a loan depends upon the Terms & Conditions of the bank/financial institution which differs from each other.
- Contribution in Margin Money
Similar to the applicant of a home loan, here the person is also required to contribute towards the building of a home. This contribution is calculated on the basis of the construction loan amount for which you have applied. Apart from this, the contribution of margin money is also calculated after evaluating the cost of land/plot which you purchased. In case the plot/land is gifted to you or you have inherited it then also the lender will evaluate the property cost according to the current market rate before sanctioning the loan amount.
- Disbursement of Construction Loan:
- The sanctioned loan amount is disbursed in parts similar to buying of an under-construction residential property from any realtor.
- The sanctioned loan will not be disbursed by the lender until a person declares his/her contribution towards the construction of the proposed home. The person is also required to produce proof related to self-contribution.
- A person is required to submit the actual site image to get the loan amount disbursal after completion of every stage which also marks the commencement of a new stage. All the photographs should have an approval from the architect/engineer before submission.
- Lastly, remember that the bank/financial institution can also appoint a separate authority to verify the evidences you produced.
We suggest you check the interest rate offered by all banks/financial institutions as the higher the interest rate results in higher amount of EMI you are required to pay back. Also, remember that every bank/financial institution won’t offer construction loan. Thus, take a quick survey of the market when deciding about the construction of your dream home.