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FAQs |
When can I make an application?
You can make an application at any time after you have decided to acquire/construct a property, even if the property has not been selected or the construction has not commenced.
How do I make an application?
One needs to submit the application form along with the necessary documents. On receipt of your application, the housing finance company will review it, ask questions wherever necessary and convey its decision to you.
What is the maximum I can borrow?
The maximum amount that one can borrow is a function of many factors, which include the purpose of the loan, whether for purchase of property, or improvement or purchase of land for development.
In addition, ones residential status whether resident in India or non-resident will also have a bearing on the maximum quantum of loan that one can borrow. Typically, if one is a Resident Indian, then he can borrow upto 85% of the cost of the property, including cost of land, subject to a maximum of Rs 5,000,000.
How is my loan eligibility determined?
Your repayment capacity is determined by taking into consideration factors such as income, age, qualifications, number of dependants, spouses income, assets, liabilities, stability and continuity of occupation and savings history.
The primary concern of housing finance companies in determining the loan eligibility is that you are comfortably able to repay the amount you borrow.
What is the rate of interest that will be charged on my loan?
The rate of interest is a function of the quantum of loan sanctioned. Interest rates are applied as per pre-determined slab rates.
For example, IDBI Bank's interest rates are applicable as;
| Loan Amount |
Loan Tenure |
Interest |
EMI / Rs 100,000 |
| upto 1,000,000 |
5 years |
8.50% |
2,052 |
| upto 1,000,000 |
10 years |
9.0% |
1,267 |
| upto 1,000,000 |
15 years |
9.25% |
1,029 |
| upto 1,000,000 |
20 years |
9.25% |
916 |
| 1,000,001 to 5,000,000 |
5 years |
8.75% |
2,064 |
| 1,000,001 to 5,000,000 |
10 years |
9.25% |
1,280 |
| 1,000,001 to 5,000,000 |
15 years |
9.75% |
1,059 |
| 1,000,001 to 5,000,000 |
20 years |
9.75% |
949 |
Though interest rates for housing finance are not very volatile, one may well be advised to look out for indication of any rate increases or decreases to finalise the timing and amount of loan.
What are the fees and charges payable and when are they payable?
Housing finance companies charge fees at the time of application (generally called processing fee) and at the time of loan sanction (termed as administrative fees).
The processing fee could range between 0.8% to of the loan amount applied for, and is generally levied to cover the costs incidental to the application.
Once the loan is sanctioned, an administrative fee of 1% of the loan amount sanctioned will have to be paid.
It should be noted that both the processing fees and administration fees are payable upfront.
What security do I have to provide?
Security for the loan is a first mortgage of the property to be financed, normally by way of deposit of title deeds and/or such other collateral security as may be necessary. Interim security may be required if the property is under construction. Collateral could be in the form of life insurance policies, the surrender value of which should be equal to the loan amount, guarantees from sound and reliable guarantors, pledge of shares and such other investments that are acceptable to the housing finance company.
Does the property have to be insured?
You will have to ensure that the property is duly and properly insured for fire and other appropriate hazards, as required by the HFC during the period of the loan and will have to produce evidence each year and/or whenever required by the HFC. The HFC will be the beneficiary of the insurance policy. This is an added cost that will add to the final cost of purchase of the property.
A person avails deductions allowed under Section 24 in respect of his self-occupied house property and he takes an additional loan for extension/addition to the same house; can he claim benefits from the interest deduction on the additional loan taken?
The maximum deduction permissible in a financial year for the original loan (if any) plus for any additional loans taken is Rs 150,000. Hence if the person's deductions on the existing loan are less than Rs 150,000, then he can claim further benefits from the additional loan taken, subject to the upper limit of Rs 150,000 for a financial year.
What are the tax implications if a person buys a house with a loan and sells it (a) within the same year, (b) after three years? Further, what is the impact on benefits related to interest and capital repayment?
If a person buys a house and sells it within the same year/after 3 years, and if any profit is made, then a capital gains tax liability arises on the same.
Let us take an example to better understand the same. For example, if you purchase a house for Rs 500,000 by taking a loan and you sell it in the same year for Rs 700,000, then you make a profit of Rs 200,000. On this profit, you will be liable to pay short-term capital gains tax since the sale took place in the same year. But, if the sale had taken place after 3 years, then a long-term capital gains tax liability would have arisen.
The long-term capital gains will be exempt from tax if the profit amount (after factoring in the indexation benefits) is invested in capital gains tax saving bonds or in a house property as specified under Section 54. |
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