Find out common asked questions
 
Frequently Asked Questions
 
1. What security needs to be provided for a house loan?
Security for the loan is a first mortgage of the property to be financed, normally by way of deposit of title deeds (a clear and marketable title). Some lenders may also require collateral security like the assignment of life insurance policies, pledge of shares, national savings certificates, units of mutual funds, bank deposits or other investments.
2. When can I apply for a house loan?
Once you have decided to acquire or construct a property, you can apply anytime thereafter, even if the property has not been selected or the construction has not commenced. Besides, loans are also available for home improvements, renovation or extension of your home.
3. How do I make an application?
You need to approach Housing Finance Company with the latest salary slips and TDS form 16 of the last two financial years of yourself and your co-applicant, if any. The loan officer will then tell you the loan amount you are eligible for and the terms of the same.
You need to submit the application form along with the necessary documents. On receipt of the application form, the HFC reviews it, asks questions wherever necessary and convey its decision to the applicant. You are advised to visit more than one company since you are likely to get better terms/ larger loan amount if you shop for the best deal.
4. What are the types of home loans available?

There are a variety of home loans available: a. Home Purchase Loans b. Existing Home Improvement Loans c. Home Construction Loans d. Home Extension Loans e. Home Conversion Loans f. Land Purchase Loans g. Bridge Loans h. Balance Transfer Loans i. Refinance Loans j. Stamp Duty Loans k. Loans to NRIs

Home Purchase Loans:This is the basic home loan for the purchase of a new home.
Home Improvement Loans: These loans are given for implementing repair works and renovations in a home that has already been purchased by you.
Home Construction Loans: This loan is available for the construction of a new home.
Home Extension Loans: This is given for expanding or extending an existing home. For example addition of an extra room etc.
Home Conversion Loans: This is available for those who have financed the present home with a home loan and wish to purchase and move to another home for which some extra funds are required. Through a home conversion loan, the existing loan is transferred to the new home including the extra amount required, eliminating the need for pre-payment of the previous loan.
Land Purchase Loans : This loan is available for purchase of land for both home construction or investment purposes
Bridge Loans: Bridge Loans are designed for people who wish to sell the existing home and purchase another. The bridge loans helps finance the new home, until a buyer is found for the old home.
Balance Transfer Loans: Balance transfer loans help you to pay off an existing home loan and avail the option of a loan with a lower rate of interest.
Refinance Loans: This loan helps you pay off the debt you have incurred from private sources such as relatives and friends, for the purchase of your present home.
Stamp Duty Loans: This loan is sanctioned to pay the stamp duty amount that needs to be paid on the purchase of property.
Loans to NRIs: This is tailored for the requirements of NRIs who wish to build or buy a home in India. EMI is the Equated Monthly Installment payable till the loan is paid back in full. It consists of a portion of the interest as well as the principal. Some of the incentives offered by lending institutions are :

i) Some companies sanction the loan without requiring you to identify property as a pre-requisite for eligibility.
ii) Free accident insurance
iii) Discounts
iv) Waiving of pre-payment penalty
v) Waiving of processing fee
vi) Free property insurance

5. Can one take a home loan for construction in a city while working in another city?
Yes, you can take loan for construction in one city while working in another city. The HFC's generally service this loan after getting details of the plot legally verified.
6. How much time does it take to get an application processed and the loan getting sanctioned?
It takes around fifteen days for processing of one's application if the documented are in order. It takes another week for the company to check out the property papers and make the disbursement.
7. What is the maximum amount, which I can borrow? How is the maximum amount derived?
Home loans are generally provided for in the range of 75%-85% of the asset value. The amount of loan varies from institution to institution and it may vary from Rs.1 lakh to Rs.1 crore. The maximum amount, which one can borrow, is a function of many factors, which includes primarily the purpose of the loan. In addition, ones residential status whether resident in India or non-resident will also have a bearing on the maximum amount of loan that one can borrow. Generally, if one is a resident Indian, then he can borrow upto 85% of the cost of the property
8. What are the repayment period options?
Repayment period options range generally from 1 to 20 years. A few lenders also offer a 30-year repayment period, usually at a higher interest rate. As a non-resident, you can avail of a loan for a maximum period of 15 years.
9. What are Collateral Securities taken by the Housing Finance Companies?
HFCs usually take some additional securities, which are called collateral securities. These may be in the form of guarantee from one or two persons, assignment of life insurance policies, deposit of shares, and units or other securities. These additional securities are taken with the hope that if a loan is not paid back recourse may be taken to such securities instead of depending upon the mortgage of the property, which is the last resort. Guarantors, when alerted, become very effective persons in prevailing upon the borrowers to fulfill their obligations.
10. What is the range of interest rates offered?
The interest rates may vary from institutions to institutions and generally range from about 10.25% to around 16%. You can view our section of "Interest Rates at a glance" at our Loans home page.
11. How is the interest calculated on my loan?
Most HFCs follow the yearly reducing-balance method, which accounts for your principal repayments only at the end of their financial year. Thus, you pay interest on the principal that you have already returned to the HFC. The effective interest rate is thus higher than the quoted interest rate by around 0.7%. Banks and some HFCs, in contrast, follow the daily or monthly reducing-balance method, which results in a lower interest burden.
12. What is the basis of interest rates calculation?

The interest on home loans in India is usually calculated either on monthly reducing or yearly reducing balance.

Monthly reducing : In this system the principal on which you pay interest reduces every month as you pay your EMI.
Annual Reducing : In this system the principal is reduced at the end of the year, thus you continue to pay interest on a certain portion of the principal which you have actually paid back to the lender. Which means the EMI for the monthly reducing system is effectively lesser than the second system of calculating interest.
13. What is the fixed rate of interest?
Some HFC's have fixed rate of interest, which means that the interest rates remain unchanged for the entire duration the loan. This basically means that you do not benefit, even if the rates of interest drop in the market.
14. What is a floating rate of interest?
This is the rate of interest that fluctuates according to the market lending rate.
15. What are the fees and charges payable and when are they payable?
Home loans are usually accompanied by the following extra costs:

a) Interest Tax: is the tax payable on the interest paid on a home loan and not the principal. This tax is some times included in the interest rate of the loan, or may be charged separately as interest tax.

b) Processing Charge: It's a fee payable to the lender on applying for a loan. It is either a fixed amount not linked to the loan or may also be a percentage of the loan amount. The loan amount received by you can be less than the processing fee.

c) Prepayment Penalties: when a loan is paid back before the end of the agreed duration a penalty is charged by some banks/companies, which is usually between 1% and 2% of the amount being pre paid.

d) Commitment Fees: Some institutions levy a commitment fee in case the loan is not availed of within a stipulated period of time after it is processed and sanctioned.

e) Miscellaneous costs: It is quite possible that some lenders may levy a documentation or consultant charges.

f) Registration of mortgage deed.
16. What are the documents required at the time of application?
The common documents that the financiers require at the pre-approval stage are:

∑ Proof of Age
∑ Copy of Bank A/C statements for the last 6 months
∑ Copy of latest credit card statement
∑ Passport size photograph
∑ Signature verification from your banker
∑ If you are salaried, you need to produce:
∑ Salary and TDS certificate
∑ Latest pay slip
∑ Letter from employer
∑ If you are self-employed you require:
∑ Your business track record
∑ Copy of audited financial statements for the last 2 years
At the disbursal stage (for property already located), you need to submit:
∑ Allotment letters
∑ Photocopies of title deeds
∑ Agreement to sell
∑ Encumbrance certificate
For self-construction:
Approved plans and clearance certificates along with estimates
17. What are the tax benefits available?
Tax benefits available are as under : (a) Exemption under Sec 88 of Income Tax Act (Rebate) for repayment of principal upto Rs.10,000/-. (b) Deduction under Sec 24 of IT Act for interest payment on housing loans upto Rs. 75,000/- (in respect of self-occupied house property acquired or constructed with capital borrowed on or after 1.4.99, and acquisition or construction whereof is completed before 1.4.2001. Tax benefits vary in case of rental.
18. Who can be a Co-Applicant?
Co-Applicants are the Co-Owners of the property in respect of whom the financial assistance has been sought. Usually joint applications are from : husband-wife, father-son or mother-son.
19. What is the EMI?
EMI or Equated Monthly Installments refers to the fixed sum of money that you will be paying to the housing finance company every month. The EMI comprises both interest and principal repayment. The size of the EMI depends on the quantum of loan, interest rate applicable and the term of the loan.
20. Can I repay my loan ahead of schedule?
Yes, you can pay your loan ahead of schedule. However, it must be noted that housing finance companies charge a fee for early redemption of loan. This fee can vary between 1-2% of the loan amount being prepaid
21. Does the property have to be insured?
You will have to ensure that the property is duly and properly insured for fire and other appropriate hazards, as required by the HFC during the period of the loan and will have to produce evidence each year and/or whenever required by the HFC. The HFC will be the beneficiary of the insurance policy. This is an added cost that will add to the final cost of purchase of the property.
22. What is the difference between a Monthly Reducing EMI and a Yearly Reducing EMI ?
Yearly Reducing EMI-In this system of calculating EMI the principle is reduced at the end of the year,thus you continue to pay interest on a certain p ortion of the principle which you have actually paid back to the lender Thus the EMI for the monthly reducing system is effectively lesser than the Yearly redu cing system of calculating the Interest.
23. What is the maximum period over which I can pay the loan?
The maximum duration of period of the loan is a function of your residential status and varies for every housing company, and is also different for every scheme.

As a resident Indian, you could avail of a loan for duration of 5 years to 20 years. As a non-resident, you can avail of a loan only for a maximum period of 7 years.
24. When can I take disbursement of the loan?
You can take disbursement of the loan after the property has been technically appraised, all legal documentation has been completed and you have invested your own contribution in full. Your contribution is the total cost of the property less the loan amount
25. In how many installments can the loan be disbursed?
The loan will be disbursed in full or in suitable installments (normally not exceeding 3) taking into account the requirement of funds and progress of construction, as assessed by the housing finance company.
26. Does the agreement for sale have to be registered?
In many states in India, the Agreement for Sale between the builder and the purchaser is required by law to be registered. You are advised, in your own interest to lodge the Agreement for Sale at the office of the Sub-registrar appointed by the State Government under the Indian Registration Act, 1908
27. Who is a non-resident Indian (NRI)?
An Indian Citizen who stays abroad for employment/carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad is a non-resident. (Persons posted in U.N. organisations and officials deputed abroad by Central/State Governments and Public Sector undertakings on temporary assignments are also treated as non-residents). Non-resident foreign citizens of Indian Origin are treated on par with non-resident Indian citizens (NRIs) for the purpose of certain facilities.
28. Who is a person of Indian Origin?
A. For the purposes of availing of the facilities of opening and maintenance of bank accounts and investments in shares/securities in India

A foreign citizen (other than a citizen of Pakistan or Bangladesh) is deemed to be of Indian origin, if,

(i) he, at any time, held an Indian passport, or
(ii) he or either of his parents or any of his grand parents was citizen of India by virtue of the Constitution of India or Citizenship Act, 1955 (57 of 1955).

Note: A spouse (not being a citizen of Pakistan or Bangladesh) of an Indian citizen or of a person of Indian origin is also treated as a person of Indian origin for the above purposes provided the bank accounts are opened or investments in shares/securities in India are made by such persons only jointly with their NRI spouses.
B. For investments in immovable properties

A foreign citizen (other than a citizen of Pakistan, Bangladesh, Afghanistan, Bhutan, Sri Lanka, or Nepal), is deemed to be of Indian origin if,
∑ he held an Indian passport at any time, or
∑ he or his father or paternal grand-father was a citizen of India by virtue of the (Constitution of India or the Citizenship Act, 1955 (57 of 1955).
29. Do foreign citizens of Indian origin require permission of Reserve Bank to purchase immovable property in India for their residential use?
Reserve Bank has granted general permission to foreign citizens of Indian origin, whether resident in India or abroad, to purchase immovable property in India for their bona fide residential purpose. They are, therefore, not required to obtain permission of Reserve Bank.
30. In what manner the purchase consideration for the residential immovable property should be paid by foreign citizens of Indian origin under the general permission?
The purchase consideration should be met either out of inward remittances in foreign exchange through normal banking channels or out of funds from NRE/FCNR accounts maintained with banks in India.
31. What are the formalities required to be completed by foreign citizens of Indian origin for purchasing residential immovable property in India under the general permission?
They are required to file a declaration in form IPI 7 with the Central Office of Reserve Bank at Mumbai within a period of 90 days from the date of purchase of immovable property or final payment of purchase consideration alongwith a certified copy of the document evidencing the transaction and bank certificate regarding the consideration paid.
32. Can such property be sold without the permission of Reserve Bank?
Yes. Reserve Bank has granted general permission for sale of such property. However, where the property is purchased by another foreign citizen of Indian origin, funds towards the purchase consideration should either be remitted to India or paid out of balances in NRE/FCNR accounts.
33. Are any conditions required to be fulfilled if repatriation of sale proceeds is desired?
Applications for repatriation of sale proceeds are considered provided the sale takes place after three years from the date of final purchase deed or from the date of payment of final installment of consideration amount, whichever is later.
34. What is the procedure for seeking repatriation of sale proceeds for NRIs?
Applications for necessary permission for remittance of sale proceeds should be made in form IPI 8 to the Central Office of Reserve Bank at Mumbai within 90 days of the sale of the property.
35. Can foreign citizens of Indian origin acquire or dispose of residential property by way of gift?
Yes. Reserve Bank has granted general permission to foreign citizens of Indian origin to acquire or dispose of properties up to two houses by way of gift from or to a relative who may be an Indian citizen or a person of Indian origin whether resident in India or not, subject to compliance with applicable tax laws.
36. Can immovable property held in India, be transferred by way of gift to relatives/registered charitable trusts/organizations in India?
Yes. General permission has been granted by Reserve Bank to non-resident persons (foreign citizens) of Indian origin to transfer by way of gift immovable property held by them in India to relatives and charitable trusts/organisations subject to the condition that the provisions of any other law, including Foreign Contribution (Regulation) Act, 1976, as applicable, are duly complied with.
37. Can foreign citizens of Indian origin acquire commercial properties in India?
Yes. Under the general permission granted by Reserve Bank properties other than agricultural land/farm house/plantation property can be acquired by foreign citizens of Indian origin provided the purchase consideration is met either out of inward remittances in foreign exchange through normal banking channels or out of funds from the purchasers' NRE/FCNR accounts maintained with banks in India and a declaration is submitted to the Central Office of Reserve Bank in form IPI 7 within a period of 90 days from the date of purchase of the property/final payment of purchase consideration.
38. Can the properties (residential/commercial) be given on rent if not required for immediate use?
Yes. Reserve Bank has granted general permission for letting out any immovable property in India. The rental income or proceeds of any investment of such income are eligible for repatriation.
39. Can NRIs obtain loans for acquisition of a house/flat for residential purpose from authorised dealers/financial institutions providing housing finance?
Reserve Bank has granted general permission to certain financial institutions providing housing finance e.g. HDFC, LIC Housing Finance Ltd., etc., and authorised dealers to grant housing loans to non-resident Indian nationals for acquisition of a house/flat for self-occupation subject to certain conditions. The purpose of the loan, margin money and the quantum of loan will be at par with those applicable to housing loans to residents. Repayment of loan should be made within a period not exceeding 15 years out of inward remittances or out of funds held in the investors' NRE/FCNR/NRO accounts.
40. Can Indian companies grant loans to their NRI staff?
Reserve Bank permits Indian firms/companies to grant housing loans to their employees deputed abroad and holding Indian passports subject to certain conditions.
41. What if I find a flat on sale from a builder? How do I check his reputation and reliability? Should I still go through a broker?
You neednít go through a broker when you are dealing with a builder, especially one of repute. However, before you deal with the builder, check out the following:

∑ Find out about his past projects.
∑ Visit some of these projects.
∑ Speak to the people living in flats built by him. Find out from them regarding
(1) timely possession,
(2) quality of construction,
(3) compliance with the agreement,
(4) whether amenities promised were provided, etc.
∑ Find out from Financial Institutions/banks this builder has dealings with.
42. How is my loan eligibility determined?
The primary concern of the HFC's in determining the loan eligibility is that you are comfortably able to repay the amount you borrow. Your repayment capacity is determined by taking into consideration factors such as income, age, qualifications, number of dependants, spouse's income, assets, liabilities, stability and continuity of occupation and savings history.
43. What is a House Loan?
The need for a house of your own can can now be fullfilled by availing of various types of house loans to suit your individual needs at the lowest rates and easy financing. Take a look at the various Banks/Financial Housing Companies that offer you all alternatives for a quick Home Loan.