Government subsidy on home loans: How to evaluate options on lenders?
This scheme is on the home loan subsidy, and hence let us be careful as to which lenders are authorised by the Indian government to process such subsidised loans.
Indian government has announced such a great scheme for home seekers which, no wonder, attracts many prospective buyers to a new property. Though there is no upper limit for the purchase price, the subsidy amount is capped at Rs. 2.20 Lakh approximately, depending upon the rate of interest offered. Moreover conditions of employment and family structure ensure that only the real needy people get the advantage. I have written about the scheme in detail here earlier.
As some time has passed by since I wrote about the scheme, I thought it will be prudent for me to caution home buyers against certain aspects and not get fooled.
This scheme is on the home loan subsidy, and hence let us be careful as to which lenders are authorised by the Indian government to process such subsidised loans. If any borrower takes home loan from any unscheduled lender, he will not get the subsidy.
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We must remember that though this scheme is valid for both ready and under-construction properties, there are some very important aspects to be looked into before a buyer chooses his home.
In ready properties, all statutory documents should be in place. All government taxes on the property has to be up-to-date, there should be no litigation pending and the approved plan violation will also loom a cause of rejection of loan-application from all standard lenders. Hence making sure that the title of the ready property is clean, being purchased either from a builder or from an individual on resale, is of utmost importance. Remember, if there is no loan, there is no question of subsidy.
Buying under-construction property is even more crucial. Borrowers need to make a very important note that not all builders and their projects fall under 'approved' category by the lenders. Both banks & NBFC-s will have specific qualifiers for a builder who is selling under-construction properties, as it is riskier for a lender. The builder will have to be of repute and has to have past records of constructing homes that are delivered successfully. So, buyers if fall prey to fly-by-night new builders who only promise to deliver, you will find that they are mostly not approved by large banks like SBI, Axis, ICICI or HDFC Ltd. These unscrupulous builders do not even approach these lenders of repute for getting their upcoming projects approved as they know that they will never get those approvals. They will mostly have tie ups with local co-operative banks or some small-time NBFC-s who may not even list in that government subsidy list.
Hence do your checking here and see which banks are authorised, before buying in anticipation of getting a subsidy.
Last but not the least, subsidy is subject to approval from the government, post verifications and the subsidy directly gets paid to the lender which they offset with your interest payable and reduce the overall tenure of the loan and not that the borrower gets any money in hand. Not qualifying for a subsidy is neither your builder/seller's nor the lender's fault.
Hope the above input helps more buyers to get their dream home subsidised and we see a happier India sooner than we dreamt of.The writer is founder of RetailLending.com