Building a house, especially your own home, is a very special experience. Right from planning its architecture to laying the first foundation and designing its interiors, the joy, satisfaction and fun is inexplicable. The flipside being that it can be a very long drawn, tedious and expensive process. The more practical aspects of constructing a house involves a lot of responsibility, thorough research and in-depth planning. For most of us, paying home construction expenses up front can be a mammoth task, or absolutely impossible. Getting a mortgage might not be the most ideal thing to do, and can also be very tricky. In this scenario, the best thing to opt for is a construction loan.
A construction loan is offered by most leading banks for the purpose of construction of a house/residential property. With this loan you can get the financial assistance to construct your dream home on a plot owned by you. Banks insist that the land on which the house is being constructed must be owned by you.
The standard eligibility criteria for availing a home construction loan are as follows–
- You can apply for a home construction loan either individually or jointly. All the proposed owners of the property have to be co-applicants.
- All the co-applicants need not be co-owners of the property.
- Both salaried and self-employed individuals are eligible for this loan.
- Not only citizens of India residing in the country are eligible, but some banks also offer home construction loans to NRIs. The documents required for the latter may vary from that of the former.
Usually, most banks also have eligibility criteria based on the following factors -
- Educational Qualifications
- Number of dependants
- Stability and volume of income
- Repayment capacity
- Income of co-applicant
- Volume of assets and liabilities
The standard documents required for Home Construction Loan have been listed below. Please note, that some additional documents required may differ from one bank to another.
- Proof of identity. This needs to be government issued identity proof like PAN card, Aadhar card, valid passport, Voter ID card
- Proof of income – latest form 16 and IT returns, salary slip of last 3 months, bank statement of last 6 months
- Proof of residence - Rental agreement, electricity bill, PAN card, passport.
Leading banks offer home construction loan at affordable and competitive rates of interest. Usually, the Interest rate applicable is based on the respective bank’s Retail Prime Lending Rate (RPLR). This fluctuates from time to time and is primarily dependent on the money market conditions.
The standard tenure of this type of loan usually ranges from 1 to 30 years, though it may vary from each bank.
Home Construction Loan Tax Benefits:
You can enjoy maximum tax benefit under the Home Construction Loan scheme. Though it may vary from one bank to another yet in a standard scenario, as per the current IT Rules, an exemption u/s 24 is Rs. 1.5 lakhs (this is for the interest amount paid in a financial year) and up to Rs. 1 lakh if the principal amount is also repaid in the same year. So, an amount of up to Rs. 2.5 lakhs is eligible to enjoy tax exemption. This can help you save approximately up to Rs. 70,000 of taxes, annually.
Banks Offering Home Construction Loan:
There are multiple leading banks in India which offer home construction loans. Some of them are HDFC, HSBC, SBI, PNB, UBI, Bank of India and DHFL. Each of these banks offer tailor-made home construction loan schemes to suit your needs and help you with financial assistance to construct your dream home.