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5 Tips to Avail a Home Construction Loan at Beneficial Terms


A property often requiresrenovation and repairs from time to time, and if anyone is going through a financial crisis, they may need to postpone their plans owing to such financial setbacks.That’s when home construction loans come into the picture.
Housing construction loans are short term home loans availed by individuals for construction or renovation of the property.Financial institutions or housing finance companies may disburse the funds directly to the contractor instead of the borrower depending upon the policies of the organization.However, one should take a few things into consideration before you get a home construction loan.


5 tips to avail property construction loan
·         Eligibility criteria of hom construction loans
A financerapproves construction loans after evaluating the eligibility criteria of the applicant. One can also check his/her eligibility via home loan eligibility calculator from trusted websites.
Some of the eligibility factors to have a construction loan approved are listed below –
1.      Involvement of a licensed builder: An individual should always go to a licensed builder for home construction purposes. A valid license of the builder and association of the builder with a reputed organization facilitates loan disbursal.
2.      Availability of certificate of commencement: An applicant of home construction loan should never get carried away by attractive brochures or just marketing from the builder. The applicant must have a proper agreement as well asacertificate of commencementfor protectionagainst legal problems which may come up without warning.Also, it helps the borrower to qualify for a property construction loan.
3.      Availability of detailed specifications to the loan provider: The lender needs to have all the details of the property such as floor plans, list of materials to be used for construction purposes, along with the blue book for loan eligibility.
·         Documents required
For a quick loan approval, an individual should provide valid documents. The lists of documents required for a construction loan mentioned below –
1.      Proof of unique identification – Aadhaar Card, Driving License, PAN, and Voter ID Card.
2.      Residential proof – Electricity bills and telephone bills, etc.
3.      Income statements details – Salary slip and bank statements.
4.      Property documents – certificate of commencement, blue book, an agreement between contractor and applicant.
5.      An applicant also needs to provide a cancelled cheque to validate his bank account.
·         Salient features and benefits of construction loans
1.      Flexible repayment tenor:Top housing finance companies providehome construction loans with flexible repayment tenor. One can make part prepayments or prepay the entire amount of credit according to their convenience.
2.      Quick loan disbursement: Enjoy fast and seamless loan disbursement procedure for construction loan provided one has valid documents and a good credit score.
3.      Tax benefits on construction loan: An individual can claim home loan tax benefits for under-construction properties under Section 80C, 80EEA, and Section 24(b) of the Income Tax Act,1961.
4.      Nominal rate of interest: Construction loan interest rates are nominal compared to other unsecured loans.
·         How construction loans differ from home loans?
Although construction loans may appear similar to home loans, there is a difference between home loans and property construction loans. Some of them are listed below –
·         Purpose of loan: An individual avails home loans to purchase a property whereas the use of construction loans is solely for construction or renovation of the property.
·         Payment disbursal procedure: The whole home loanamount is a one-time disbursal process. In construction loan,disbursals are made in the form of instalments according to the progress of construction.
Availing home construction loans are beneficial as they are secured, and disbursals of the loan amount are made in instalments. One should be aware of all the terms of the loan and plan in advance to avoid any hindrance during the loan tenor.