Home Loans for Under Construction Properties: Benefits and Eligibility

What Are Home Loans for Under-Construction Properties?

Benefits of Home Loans for Under-Construction Properties

1. 1. Lower Property Prices: One key advantage of investing in an under-construction property is that these properties tend to be priced lower than ready-to-move-in homes. By opting for home loans for under-construction properties, you can buy a property at a better price and spread out the payments over time.
2. 2. Phased Payment: For home loans for under-construction properties, the funds are released in stages depending on the construction progress. This phased disbursement facilitates payment and management since interest is calculated based on the actual disbursement amount at each construction stage. This enables a part-wise increase in loan amount and associated interest rates, making it more economical for home buyers to repay.
3. 3. Tax Benefits: Like any other home loans, home and construction loans have provisions regarding tax exemptions. You might have seen it based on Section 80C of the Income Tax Act on principal repayment. Further, under Section 24(b), it is allowed to take deductions for the interest paid once the construction is completed. 
4. 4. Customisable Loan Tenure: Borrowers can choose a loan tenure that suits their repayment capability. Whether you prefer a shorter loan term or an extended tenure, home loans for under-construction properties offer flexible repayment options. You can use a home loan or EMI calculator to determine your monthly installments and choose a suitable tenure. 
5. 5. Favourable Interest Rates: Home loan interest percentages for under-construction properties are generally competitive. Borrowers can opt for a fixed or floating construction loan rate of interest based on their financial feasibility. Comparing loan-versus-property interest rates with home loan rates can help you decide which option best fits your financial plan.

Eligibility for Under Construction Properties Home Loans

• Income Stability: The lenders welcome any borrower with regular income, whether wage/salary earners. This means that the repayment capability will be able to show your income and your balance of all positions every month. A home loan calculator or EMI calculator home loan will tell you how much you can afford.
• Credit Score: A good credit score is crucial for securing home and construction loans. Lenders typically require a credit score above 750 to offer favourable interest rates. A higher credit score also increases your chances of loan approval at a lower construction loan interest rate.
• Property Documentation: The lenders must document every aspect of the property under construction, including the builder’s approvals, permits, and project plans. They must also ensure they can lawfully obtain the property to prevent any problems in approving the loan application.
• Down Payment: Home loans for under-construction properties require down payments of 20% to 30% of the property price. This should be considered in your budget. Using the freely available home loan EMI calculators, you can identify the downpayment, EMI, and property loan tenure to determine how much to pay first and subsequent EMIs.

Using Home Loan Calculators for Financial Planning

Best Home Loans for Properties Under Construction

Points to Remember

• Choose a Builder with a Commencement Certificate: Ensure the builder has a valid commencement certificate. This document confirms that the construction is authorised and free from legal issues, making it easier to apply for home and construction loans.
• Negotiate for a Better Price: Don’t hesitate to negotiate for a price that fits your budget. A lower price means you can apply for a smaller home loan, which results in lower EMIs. Use a home loan calculator or home loan EMI calculator to estimate repayments and ensure quicker repayment.

Conclusion