There are several types of property available in India. But most of us are very unclear about them as in what exactly is that loan, documents required, the process to be followed, etc.  This article will now certainly give individuals clarity over all of that. 

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Types of property loans on the real estate property

The real-estate property loans are classified based on a factor: whether or not the loan requires collateral.

  • Secured loans     – examples: home loans, mortgage loans  
  • Unsecured loans – examples: personal loans, short-term business loans

This article specifically deals with the secured loans that one can obtain on their property.

  • Secured loans 

Secured loans are those which require collateral. So, even if the borrower doesn’t return the amount, lenders can get back their money by selling the asset which was kept as collateral. Also, interest rates on these loans are lower than those which do not require collateral.

Many loans come under this category and are mentioned below:

  • Home loans 

These are the secured funds provided for the borrower to build his/her house. Different types of home loans which are available in India are:

  • Home-purchase loan

These are the loans given by financial institutions to buy a home. Generally, they provide the borrower with the maximum amount i.e 80-85% on the current market value of the home.

Documentation required

Firstly, the borrower has to provide his/her identity proof, age proof, residence proof (Aadhaar, PAN, etc). A salaried individual must provide income proof documents like form 16, payslips, etc. A self-employed individual must have to submit documents as IT returns for the last 3 years, balance sheet, business license details, business address proofs, etc. Also, pertaining to the property, the borrower will have to submit property documents like NOC form from the builder, detailed estimate of construction, Registration sale deed, property tax receipts, etc.

How to apply for a home loan? 

The process starts with filling in the home loan application form of the desired bank. Then all the required documents should be submitted. After this step, the borrower has to pay a processing fee to the lender which few might ask and few might not. In the next step, documents will go for a verification process to check for the borrower’s profile authenticity. Then, if all the mentioned information about him/her is true and if that person qualifies the eligibility criteria, the property will once be checked and verified and if everything seems legal and authentic, he/she will be sanctioned the home loan.

The same process can be carried out online as well. Be it online or offline, the procedure remains the same.

  • Home-extension loan 

This loan is given on the purpose of the addition of living space to the existing home. 

Documentation required 

The borrower will have to submit:

  • Identity, residence, income proofs. 
  • Property related documents like title deeds of the property, construction estimate by the builder, proof of no debts on property, copy of plans approved by the local authority, etc.

How to apply for a home-extension loan? 

Fill in the home-extension loan application form of the desired bank. Submit all the required documents. After verification of the borrower’s documents and property, if they seem to be authentic and if the person does not seem to be a loan defaulter, he/she will be sanctioned the loan. 

Borrowers can apply for this loan either by online or offline means.

  • Home improvement loan 

These are the loans given to renovate and improve the existing house. 

Documentation required 

  • Application form for the loan with passport size photographs. 
  • Identity, address, and income proofs.
  • All original title deeds of the property and estimate value from the architect for the improvement of the house.

How to apply for a home improvement loan? 

Borrowers can apply for home improvement loans either by online means or offline means and the process includes filling the application form, submitting documents, getting verified and if everything is verified to be authentic, the borrower will be sanctioned the loan.

  • Mortgage loans/ loans against property

A mortgage loan is a type of secured loan where the borrower can avail the funds by offering his/her asset as collateral to the lender. The collateral remains with the lender until the whole of the loan taken against the property is repaid. 

The collaterals generally offered are real estate properties like houses, commercial plots, etc.

Documentation required

  • Identity, income proofs. 
  • Whatever is the collateral offered, all the documents related to it must be submitted.     

           Eg. Own residence itself.

            Residence ownership documents like: Property documents,

                                                                                   Maintenance bills,

                                                                                    Electricity bills.

  • Document copies of property that the borrower wishes to buy: Sale deed/copy of Agreement, maintenance bill, share certificate (if society formed), etc. 

How to apply for a loan against property? 

Borrowers can apply either of the ways- online or offline. The procedure for both remains the same. Select the desired bank, fill in the loan application form, submit the relevant documents, and wait for the verification process to be completed. Once everything seems genuine to the lender, the loan amount will be disbursed into the borrower’s bank account.

  • Lease rental discounting (LRD) 

It is a term loan granted to the borrower against the rental receipts derived from lease contracts with corporate tenants. The loan is provided on the basis of the underlying value of the property and the discounted value of rentals.

LRD is the consideration between the borrower, the tenant, and the lender.

The borrower takes the loan against the rental receipts offered by tenants and the rents that they earn will go back into the payment of the loan to the lender.

Documents required 

  • Identity and address proof.
  • Proofs related to leasing/renting: 
  1. Copy of Lease Agreement along with the latest rent paid receipt
  2. Business Profile on Company’s Letterhead
  3. Partnership deed in case of partnership firms                   
  4.  Balance sheets ( duly signed by CA)                                                            
  5. Certificate of incorporation, Date of Commencement of Business and
  6. Memorandum of Title Deeds, Form 32                                           
  7. Firm/Company’s PAN Cards and other documents may also be required.                                                           

How to apply for LRD?

Select the bank of choice. Fill in the loan application form and submit the required documents. On completing the verification process by the lender, the borrower will be granted the loan if their profile seems authentic.

Conclusion:

Buying a real estate property like a home or even renovating the home seems like a dream to most of us. And these loans help us make them come true. But before proceeding with it uncertainly, it’s better that one gets clarity over all the documentation process, application process, etc. Also apart from these, it’s even important that individuals must select the right financial institution. For this, they will need to thoroughly research all the banks, the loan amounts, and the interests they provide, etc. Because only with the right kind of information in hand, one can most likely avail the maximum benefits of the loan and be successful in the transaction.