Scope and terms of Real Estate Finance

Murari Sir

By Murari Chaturvedi, Editor-In-Chief

A home is the basic requirement of the society/people but the capital requirement per dwelling is so large that few individuals can raise it from their own savings. Hence there is a great need and scope for housing finance. Most of the home purchasers need housing finance invariably. The biggest benefit for taking housing loan for the housing unit you want to purchase is that the housing finance companies /banks have their own legal department which goes through all the relevant papers of the property in which you are purchasing a flat. They will go through the details provided by the developer/builder and they will give the go signal only when they are completely satisfied with them. We have seen the trend to seek housing loan even from the persons who can pay the entire money to acquire a house. Thus the purchaser of a house is sure that the flat he is purchasing is free from all in cumbrances. They may pay up to 90% of the cost of a flat and take housing loan for the remaining 10% of the cost of the flat, by doing so they will know that the flat they are purchasing is free from all encumbrances and has a clear property. The loan applicant has an option of having co-applicant to his loan to enhance his loan eligibility. The maximum tenure of the loan is normally fixed by the housing finance company and is usually maximum up to 80% of the value of the flat. For the repayment of the loan the installment that applicant pay is normally restricted to about 40% of his monthly gross income. Most of the housing finance companies consider applicants profile before they judge his capacity to repay loan. The applicants are judged on the basis of age, qualifications, number of dependents, employment details, employer credentials, work experience, previous track record of repayment of any loans that he has availed of occupation and the industry to which applicants business relates to if applicant is self employed then his turnover in the last 3-4 years. Most housing finance companies have a team of civil engineers to visit the site to get a technical report on the quality of construction and compliance with the local laws before they disburse the loan. They also go through applicants’ property documents to ensure that the documents are clear.  The documents that need to be submitted for taking housing loans vary from one housing finance company to another. Income documents to be submitted to the HFI are salary slips for last three months, appointment letter, form 16 issued by an employee on applicants’ name, last three years profit and loss account statement duly attested by a chartered accountants if self employed and last three years income tax returns duly filed and certified by the income tax authorities. There are some more documents like business card, Pan Card, passport, voters ID card, birth certificate, etc. after submitting all the required documents the housing loan is sanctioned.

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