House Construction Loan
house construction loan
Banks and housing finance companies (HFCs) offer house construction loans, making the dream of building a house on your land more accessible. These loans are available to both current and new home loan applicants, ensuring that everyone has the opportunity to turn their dream into reality.
Many lenders include this facility within their regular home loan products, while others offer it as a dedicated option called "home or house construction loan" under the broader home loan category.
Key Features of House Construction Loans
A house construction loan can be ideal for those looking to construct a house on their land or add a floor to an existing property.
- Long Tenure: House construction loans offer flexible repayment terms, from 5 to 30 years. As a result, the EMIs are manageable, and the loan is affordable over the long term.
- Tax Benefits: House construction loans offer tax benefits on principal and interest paid under Sections 80C and 24B of the Income Tax Act. With deductions include up to ₹ 2 lakhs on interest payments and principal payments up to ₹1.5 lakhs. In addition to that, first-time homebuyers enjoy an extra tax benefit of up to ₹50,000 under Section 80EE.
- Loan Amount: The loan amount from the bank or NBFC depends on your income and on the repayment capacity. Certain lenders offer loans of up to 90% of the property's value. Having a co-applicant is likely to increase your loan eligibility.
- Loan Refinancing: A top-up loan may also be applied to an existing home loan for construction purposes. In such a case, the bank reviews your repayment history to assess eligibility for a top-up construction loan. Also, some banks or NBFCs may charge a small processing fee for this option.
- Balance Transfer Option: Many banks offer balance transfer services for construction loans, allowing borrowers to switch their loans to another lender with a lower interest rate. A balance transfer fee of up to 1% may apply.
These features make house construction loans a flexible option for financing the home of your dreams.
Eligibility Criteria for a House Construction Loan
Applicants should meet the following requirements to qualify for a house construction loan:
- Age: Should be between 18 and 65 years.
- Citizenship: Open to Indian citizens and Non-Resident Indians (NRIs).
- Employment: Salaried applicants require a minimum of one year with the current employer.
- Credit Score: A credit score of 750 or above and a positive credit history are preferred.
- Residence: Applicants should have a permanent address. If renting a home, they must have lived at the current address for at least one year.
Meeting the criteria mentioned above can help ensure a smoother application process for a house construction loan.
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