NEWS & ADVICE : HOME LOANS
Know About Different Types of Home Loans in India
By Joseph Samson
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Home loans are an attractive and popular means of buying a dream house for most people. In India, the demand for home loans has increased manifold in the last decade. Every day numerous people apply for home loans to own a perfect abode for themselves. The fact that home loans come with added advantages (like tax benefits) is the icing on the cake.

Lenders provide home loans not only for buying houses but for a variety of related purposes. The home loans market is brimming with diverse home loan products which cater to different needs of individual customers. The following are some popular types of home loans available in the Indian housing finance market:

Land Purchase Loans

Land purchase loans are taken to buy a plot of land on which a borrower wishes to construct his house. Most banks offer up to 85 percent of the price of the land. These loans can be availed for residential as well as for investment purposes. Almost all leading banks offer this loan like ICICI Bank (Land Loan), Axis bank (Loan for land purchase) etc.

Home Purchase Loans

The home purchase loans are the most popular and the most commonly available home loan variants. These loans can be used to finance the purchase of a new residential property or an old house from its previous owners. In this type of loan also, lenders usually finance up to 85 percent of the market value of the house. These loans are provided either on fixed interest rates or floating interest rates or as hybrid loans. All banking institutions and housing finance companies provide this type of loan.    

Home Construction Loans

These loans can be availed by those individuals who want to construct a house according to their wishes rather than purchasing an already constructed one. The loan application and approval process for home construction loans are somewhat different from those of the commonly available housing loans. The plot of land on which the borrower wishes to construct the house should have been bought within a year for the cost of the land to be included as a component for calculating the total price of the house. If the plot has been purchased more than a year ago, then the above clause is not applicable. The borrower has to make a rough estimate of the cost that will be incurred for the construction of the house and then apply for the loan with the same amount. The lender then takes over from their and analyses the application to decide whether or not to sanction the loan. The approval or disapproval of the same is intimated by the lender to the applicant. The loan amount may be disbursed at one go or in several installments according to the progress in the construction of the house. Banks like Canara Bank, UCO Bank, Bank of Baroda provide these loans.


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