A to Z about Home Loans - The Basic Guide to Home Finance by Tata Capital

HOME LOAN

Want to buy a plot and build your dream home on it? We have plotted the journey to your own plot of land

Apr 16, 2018

Planning to buy a plot, can you apply for a home loan?

Tired of living in concrete cages, many families are looking to build a house these days. While the modern flat system has many amenities, the Singh family wanted to live in a house of their own with a small backyard to grow seasonal vegetables, a garden in the front and room for everybody to sit in the open. When you own a plot of land, your family can have all the space for themselves. The cost of plots was high, and so the Singh’s looked at financing options. Let us find out how they got a home loan for a plot.

Plot loans are those given to buy a house. While the concept of home loans ideally is meant for buying flats, little do people know that a home loan can be availed for a plot too. At Tata Capital, home loans are given for self-construction, plot plus self-construction, home improvement/renovation and home extension. Once you purchase the land, construction is carried out subsequently.

The tenure of home loans for the plot is similar to a flat loan, with a minimum and maximum tenure of 12 months to 360 months. If you thought that the cost of land makes such loans out of reach, you could not be more wrong. Home loans are available from Rs 2 lakh to Rs 10 crore for residential properties. The Singh family only needed to buy is a plot that is a non-agricultural land situated preferably within municipal/local development authority limits.

Traditional avenues like banks will always be wary about giving a loan for buying a plot. This is where new-age NBFCs like Tata Capital bridge an important gap and help customers like the Singh family. We at Tata Capital understand your needs and your specific circumstances and then offer customized home loans. At the same time, we offer the right repayment option, loan tenure, and extremely competitive interest rates.

While buying a plot via the home loan route, you may come across the Loan to Value Ratio (LTV). This ratio basically implies to the sum of loan you can get for a real estate property such as a plot. When you want to buy a plot of land, loans can fund almost 70-75% of the plot cost if its high priced plot, which reduces your burden of financing to a great extent. In case the plot cost is less than Rs 20 lakh, expect 85-90% of property cost to be financed by the loan. The head of the Singh family, Mr.Rajwinder applied for the plot loan jointly with his wife, Sarah. Usually, all proposed owners of the property will have to be co-applicants but it is not necessary for all co-applicants to be co-owners.

With extremely attractive interest rates, bullet-speed disbursement and minimal paperwork, a Tata Capital home loan for plot making your dream of having own house a quick reality. When applying for the loan, besides the filled form salaried individuals need to submit just a photograph, identity and residence proof, a copy of latest salary-slip, form 16, last 6 months bank statements and processing fee cheque. Mr. Singh is a businessman. So instead of salary slip, and form 16, he was required to submit education qualifications certificate, proof of business existence, last 3 years income tax returns (self and business) and profit/loss statement and balance sheet.

Within a fortnight, home loans for a plot are ready with the sanction, if all documents are okay and processes have been complied with. Applicable interest rates (monthly rest basis) for salaried customers and doctors are 8.75-8.8% for a home loan below Rs 75 lakh. If the total amount is above that, there is a minor 5 basis point increase. For self-employed, loan amount below Rs 75 lakh is given at attractive 8.90% and above Rs 75 lakh at a competitive 9.05%* without any hidden charges. Tata Capital Home Loan appealed the most to Singh family due to repayment flexibility, easier norms, quick disbursal and the trust in Tata brand. They finally had their long-cherished dream come true.

Don't worry about land plot cost when planning to build your own house. We at, Tata Capital, will help you live your dreams.

Click here to apply today.

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Repay your Home Loan Faster

Apr 09, 2018

Want to repay Home Loan faster? Have a look at this infographic by Tata Capital with smart tips to take informed decision.

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Important Things to Consider When Buying A Second Home

Feb 19, 2018

Samir’s New Investment Option

Samir is a 40-year old businessman leading a reasonably well planned life. He is doing well in his business and earning well. He has achieved the goals he considers important like a good marriage, bringing up a nice kid, owning a spacious apartment, having sound investments and owning two mid-size cars. He takes three vacations each year. He is expecting a good income this year and for some years into the future too, and wants to look at other options to invest his hard earned money.

From among the alternatives he looked at, he feels he should invest in a second home so as to provide for his child’s future. He goes about researching the pros and cons of owning a second home.

Advantages of Owning a Second Home

Samir’s research (https://www.ibef.org/industry/real-estate-india.aspx) indicates that the real estate market in India is growing at a fair clip – 11.2 percent CAGR. He feels that traditionally, Indians never lose money by owning homes.

His research indicated

  • The government giving a big push to the housing sector
  • Great tax benefits on owning homes including multiple homes
  • NBFCs such as Tata Capital offer home loans at attractive interest rates
  • He can take home loan for multiple properties

What to consider while buying a second home

During his research, Samir found out that he should examine all angles of buying a second home carefully before he committed himself to go for the second home. More specifically he found that

  • It is advantageous to take a home loan for buying the second home as the tax benefits are substantial
  • Even though he can afford to buy the second home from his own funds he finds that a loan is more advantageous and he can deploy his own funds in his other investments which can earn him more than the interest he would pay for the loan
  • He should buy a home in a locality which is well known for its convenient location to nearby shopping areas, schools, transportation, reputation and availability of basic infrastructure
  • Since he is planning to let out the home, he should choose a location which can fetch him good rent
  • He should buy from reputed builders and check their offerings for the latest in construction technologies, amenities provided, approvals received, sanctioned plans, property documents and title deeds
  • He should do due diligence on the builder’s reputation for delivering on time
  • He should thoroughly examine all associated costs to arrive at the total cost – cost of home, amenities, registration costs, car parking, deposits, statutory levies and any other cost
  • It is advantageous to buy a completed house as the tax benefits apply from the date of purchase whereas for a under construction house, there are limitations
  • Since the IT Act attaches a notional rental income for the second home if it is not rented, it is advantageous to rent the second home
  • There is a 30 percent standard deduction available for rental income
  • Long term capital gains benefit on the second home is also available
  • Tax benefits on principal repayment up to Rs 1.5 lakh (Rs 2 lakh for senior citizens) is available only for one house and not for the second house under Section 80C
  • Tax benefits on interest payment for the second home loan is available under Section 24(b) – limited to Rs 2 lakh or actual interest paid, whichever is lower
  • It is advisable to take a home loan insurance so as to cover the repayment if any unfortunate incident happens to him without troubling his family

After considering the pros and cons Samir decides that he should go for the second home ready built and let out to take advantage of all the benefits available under the IT Act.

Tata Capital is an NBFC extending various loans including home loans to help borrowers take advantage of tax benefits. With Tata Capital, obtaining a home loan is very simple and effortless. You can even refer to our home loan guide. The home loan guide helps you to understand the home loan process and make considered decisions regarding the home you want to buy with our home loan product.

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