Planning to Construct Your Own Home? Get a House Construction Loan

For those having ownership of land, it is feasible to avail themselves of a house construction loan.

Building your own home, can be a dream of a life-time for many. It can be exciting to design and create the ‘palace’ of your dreams. It can also be a very expensive and exacting experience. But the good news is that you can, under certain terms and conditions, have your dream home financed through a House Construction Loan’. People are aware that under-construction or ready-to-move-in houses are usually financed by banks and housing finance companies. However, few are cognizant that it is generally possible to get a loan to construct your own house.

Procedures for Application of Loan

While applying for a house construction loan, a prospective applicant would have to furnish proof of income, a KYC (Know Your Customer) verification, tax returns for the preceding few years (as specified by the bank), property details with clear proof of title in her favour, all clearances from relevant authorities and sufficient evidence that the land is free from any encumbrance.  Among other things, the applicant would also have to submit a plan and layout of the structure approved by the concerned authorities, a costs-estimate for the entire construction planned certified by an architect/civil engineer, and an appraiser’s estimate of the value of the house planned. Details of the contractor and sub-contractors shall need to be furnished for verification of credentials and track-record. It is mandatory for the applicant to be investing a sizeable part of the construction cost from her own pocket to show good intent. Proof of the personal stake of the applicant and the mode of putting up this money can sway the bank’s decision in favour of the applicant.

Qualifying for the Loan

The applicant may apply for the construction loan to one or more than one bank to avail herself of the best offers that may suit her. Some of the leading lenders that provide home construction loans are state owned banks like SBI, PNB, Bank of Baroda and others, private banks like HDFC, ICICI and many more as well as other financial institutions like India Bulls Housing Finance, Dewan Housing Finance and others.

After the submission of all the relevant documents and evidences stated above, the bank shall do due diligence and evaluate the eligibility of the applicant and may declare her qualified for the loan. Mere qualification does not ensure sanction of the loan applied for. The bank shall further evaluate whether the applicant is eligible for the loan amount applied for and sanction only that amount that it finds her worthy of. Once the proper sanction is awarded, the applicant may begin construction of her home.

Disbursement of the Loan Amount

The disbursement of the sanctioned loan amount is done by the financial institution only after it has ascertained that the applicant has brought in her share of the amount agreed to in the deal. The bank will require the applicant to submit proof of the levels of construction achieved by way of photographs and certification of the architect or civil engineer. It will also periodically inspect the progress on-site during the construction and will release funds in phases, corresponding to the progress being made in the actual construction on the ground. This is in many ways similar to the procedure followed in case of an under-construction flat booked with a developer.

Follow the procedures meticulously and have a hassle-free experience at building your dream home.