- Where Should You Apply for a Home Construction Loan?
- Get the List of best lenders for home construction loans and choose accordingly!
You are given loans not only to buy a home but also to construct the same on an owned plot, which could be on a freehold or leasehold basis. Home construction loans can be given by banks and housing finance companies to both salaried and self-employed at varied interest rates. The loan quantum is decided based on the construction estimate that a chartered engineer submits to the lender. The estimate goes on to decide the cost of the property. A certain percentage of the same can be financed as a loan.
As the market is flush with lenders offering home construction loans, it becomes difficult for a layman to choose the best one. We understand that and have thus put forward a list of lenders whose interest rates are lower, loan quantum is impressive and offer flexible repayment periods. So, without any further delay, let’s get straight to them.
The First in the List is SBI Home Construction Loan
State Bank of India (SBI), the largest public lender, achieves a numero uno status in the home loan segment. It finances as much as 90% of the property cost. Loans upto INR 30 lakh, above INR 30 lakh-75 lakh and above INR 75 lakh can be financed upto 90%, 80% and 75% of the property cost, respectively. If you talk about the interest rate, it ranges from 9.15% - 11.30%. You can get the loan for a maximum of 30 years. The one-time processing at 0.35% of the loan amount plus Goods and Services Tax (GST) will also be debited by the state-owned lender.
HDFC Limited Shows Why One Should Trust it for a Home Construction Loan
HDFC Limited is also a dominant force in the home construction loan segment like SBI. The renowned mortgage firm provides a maximum loan upto 90% of the property cost. Loans upto INR 30 lakh, above INR 30 lakh-75 lakh and above INR 75 lakh can be financed upto 90%, 80% and 75% of the property cost, respectively. The interest rate charged by the lender ranges from 8.50% - 9.40%. The loan is repayable over a maximum of 30 years. You will need to pay a processing fee at 0.50% of the loan amount plus GST. The maximum fee for salaried and self-employed professionals is capped to INR 10,000 + GST and INR 3,000 + GST, respectively. On the other hand, self-employed non-professionals will need to pay a maximum of INR 4,500 + GST.
How Good an Option of LIC Housing Finance is?
LIC Housing Finance also offers you a loan to construct a home on an owned plot. While loans upto INR 30 lakh can be given at upto 90% of the property cost, loans above INR 30 lakh-75 lakh and above INR 75 lakh to be given at 80% and 75% of the property cost, respectively. As far as interest rates are concerned, they range from 8.50% - 10.75%. While salaried can get a maximum of 30 years to repay the loan, self-employed won’t be given more than 20 years for the same. As far as processing fee is concerned, it will be 0.25% of the loan amount, subject to a maximum of INR 10,000 plus GST for loan amount upto INR 1 Cr. Loan amount exceeding INR 1 Crore will have a processing fee of INR 25,000 plus GST.
Shall You Apply for a Home Construction Loan at ICICI Bank?
Yes, you can! The private banking leader has slashed the interest rates on home construction loans to as low as 7.70% per annum. Meanwhile, the overall rate ranges from 9.00% - 10.05%. Both salaried and self-employed are eligible for the loan. The processing fee for salaried and self-employed is different. While the salaried need to pay the fee at 0.25% of the loan amount, self-employed need to pay at a higher 0.50%-1% of the loan amount. A 18% GST is payable over the fee. The maximum fee for salaried professionals is, however, capped to INR 10,000 plus GST.
How to Arrange for the Sum Not Financed by Home Loans?
Home construction loans are financed upto 75%-90% of the property cost. The remaining 10%-25% portion is your obligation to fulfill. That’s why planning a home construction is as important as buying a home. So, what are the options for you with which you can accumulate the required sum? You can keep money in one or multiple products to do so. If you are a conservative investor, ensure you keep maximum in a fixed deposit or top-rated debt funds. While fixed deposits can fetch you interest at around 5%-7% per annum, debt funds can earn you slightly higher. The return from debt funds is, however, not fixed and is greatly dictated by the market movement.
Aggressive investors will like to invest in risky, yet high-return propositions of equity mutual funds. Don’t get overawed by the ongoing COVID-19 pandemic by refraining from equity investments. Yes, the pressure is there on the financial markets. But even then, you have the opportunity to make the most of rupee cost averaging with mutual fund SIP. Now as the market has hit low, your SIP investments can buy you more units at a lesser price. When the market will go up, the accumulated units during this phase can help you generate good returns.
For diversification, we advise you to invest in more than one product to accumulate the goal sum. The proportion of investment will depend much on your risk appetite besides the goal amount and the time in which you want to accumulate the same.