If you had booked an under-construction flat sometime in the last decade, you may be one of those unlucky ones who saw their dream house remain a dream as housing projects got stalled due to financial irregularities committed by promoters. With the intervention of Real Estate Regulatory Authority in respective states, some of those projects were revived – with a new developer coming in or the homebuyers association getting the mandate to complete it. However, most of these revival schemes came with a cost escalation. For those who now need to take a loan or have to revive their old loan accounts, this means knocking at the doors of lenders once again.
Change of builder documents
The first step is to ensure that the documents reflect the new realities. Your new builder will draw up a fresh ‘Agreement to Sell’ deed which will not only mention the terms of sale but also the amount of money you had paid to the previous builder, the new cost of your home including escalation, if any, and how much you have to pay now. Do remember that if the total amount to be paid to the new builder is less than Rs 50 lakh, you do not have to deduct TDS, even if the total cost of the flat is above Rs 50 lakh.
Whatever documents are required normally to get a home loan is applicable here too. “In most cases it is either a court order or a change of ownership document that is required, which is available in public domain or provided by the developer to the customer. Most properties are coming through NCLT/courts so one single order suffices the requirement,” says Kaushik Mehta, founder & CEO of Ruloans.
Reassessing loan eligibility
Since you are requesting a higher loan amount on an existing loan, the lender will reassess your eligibility based on factors, such as current income, employment status, credit score, and debt-to-income ratio. This helps it determine whether you will be able to service the increased EMIs for a higher loan amount. Again, since the bank had done the credit/risk assessment of the project a long time back, it will be required to repeat the entire process again. This could take some time, so be prepared to wait for a couple of months.
Borrowers in such projects can be divided into three groups: those with an on-going loan who now need it to be enhanced, those who had cleared previous loan and now need money for the cost escalation, and finally, those taking a loan for the first time. Be prepared to pay for loan processing charges, legal charges and documentation fees in all three situations.
Vet loan transfer
As interest rates are at their peak, you may look at transferring your loan balance to a bank/ NBFC offering a lower rate of interest. Doing this can reduce your EMIs, interest burden, and potentially a significant chunk of your loan tenure, says Adhil Shetty, CEO, Bankbazaar.com. “Before you opt for a loan transfer, carefully consider the cost and fees associated with it, such as processing fees, legal charges, and documentation expenses. Compare this with the costs of servicing your current loan. Factor in the time and effort you have to put in to transfer process,” he says.
Track construction pace
While you may be relieved that work is beginning again at the stalled project, do keep a keen eye on the pace of progress. If you are confident of the approximate duration by which you will get your house, you can wait and benefit from the price appreciation. But if the loan is stressing your finances, it may be advisable to cancel your booking, take back your money and close your loan.
Queuing up for a loan again
* Time elapsed since approval of original loan may impact loan charges
* Apply with new ‘Agreement to Sell’ deed, escalated cost sheet & demands schedule
* New builder will also liaise with banks to get project approved with cost mark-up