It is very difficult to construct  house without availing housing loan. There are various banks and Housing Finance Institutions (HFIs) which provide housing loans. Despite their existence, availing housing loans is not an easy task.
Though banks and financial institutions do have a positive approach in matters concerning housing loans, they would be handicapped to entertain any application for the loan unless and until the applicant has good and marketable title over the property and has complied with the requirements of the bank for  sanction of housing loan.
Therefore, the primary requirement which a borrower of the housing loan has to fulfill is to comply with the procedural requirement of the lending institution with necessary supporting documents and proving the marketable title of the property.

Housing loans
The banks and financial institutions entertain applications for the grant of housing loans and for the purchase of site. Besides for ready built house or flat, for the construction of house, renovation and repair  of the house etc.
1. Loan for the purchase of land — Most of these institutions do not entertain applications for  the grant of loans for house sites since the risk involved in these transactions are more than those in other types of loans. But, still banks and financial institutions do grant loans for house sites.
2. Loan for  house  construction — Generally, a large number of people get loan from the banks and financial institutions for the  construction of a building as per  the sanction plan.
3. Composite loan — Under composite loan, banks and financial institutions grant loans for both buying the site and also for the construction of a house thereon under a single application.
4. Loans for renovation or repairs — The banks and financial institutions grant loans for renovation or repair of the existing house upon being satisfied with the property documents and the repaying capacity of the borrower.
5. Loan for the purchase of ready built house or flat — The banks are not averse to grant loans for the purchase of ready built house or flat.
6. Take over loan — In cases where a borrower has already availed housing loan from one of the financial institutions or banks, but desires that the loan amount outstanding of that bank be taken over by another bank for various reasons such as low interest rate, flexible EMIs, conversion of flexible rate of interest to fixed rate of interest   etc., the latter bank upon being satisfied with the title of the  property and the credibility of the borrower would clear the outstanding loan amount of the previous bank by sanctioning  loan on the basis of the property documents already pledged with the previous bank and upon fulfiling the procedural requirements of the latter bank.
Once there is take over of loan, the borrower would be liable for repayment of the loan amount with interest of the latter bank.
The following are factors which are considered by the banks for sanction of housing loan: Regular Income of the applicant.
The first and foremost aspect which the banks consider before entertaining the loan application is to know whether the applicant has the regular monthly income or not. For this purpose, in the case of salaried persons, employment in a reasonably good organisation with loan repaying capacity would be the criteria adopted to decide as to whether the borrower could be considered for grant of housing loan or not.
In the case of self employed or businessmen, the duration of their standing in the profession or business, their financial status etc., would be considered before considering the application for housing loan.
To arrive at the quantum of loan permissible, the banks will  take into consideration the income declared in the IT return for the last three years, bank statements for the last 6-12 months and other relevant documents.
The financial transaction statements issued by the bank  will disclose various relevant information such as outstanding loans and repayment, if any, details of bounced cheques or  regular credits of income or subsisting encumbrance etc.

Credit rating
In the case of salaried people, loan will be sanctioned on the basis of the present net salary and only 50% of the salary amount will be considered by the bankers for loan repayment purpose. For instance, if the applicant is getting Rs 10,000 per month take home salary, loan will be sanctioned taking into consideration 50% of the salary only. The  banks will also look into the total number of dependents of the applicant to ascertain his repayment capacity.
If the dependents are more, the loan amount sanctioned will be obviously less. In addition to this, the applicant’s antecedents are also thoroughly checked before sanctioning the loan. Similar criteria  will be adopted in the case of self employed and business people.
To make doubly sure of repayment of loan by the borrower, in many cases, the banks do insist on providing a guarantor for the loan sanctioned.

Age factor
The banks do not generally entertain applications for repayment of housing loans beyond the age of 65 years. In other words, housing loans are to be cleared before the borrower attains the age of 65 years.
To entertain applications to sanction higher housing loans than normally admissible to an applicant, banks do consider joint applications and sanction housing loans by considering the income factors of both the borrowers. Be that as it may, no applications from person with irregular and uncertain monthly income will be entertained by the banks for sanction of housing loans.

Property age
The age of the property is the primary deciding factor for sanction of housing loans in respect of old buildings.
For sanction of housing loan for the purchase of old buildings,  usually the banks consider the condition of the building, date of construction etc. But no housing loan is sanctioned if these buildings are of more than 50 years.

In addition to this, the property which the borrower intends to purchase should be within the geographical limits approved by the banks for sanctioning the loan.

If the applicant intents to buy properties situated in the areas which are black listed by the banks for various reasons, no loan whatsoever would be sanctioned, irrespective of borrower’s financial status.

Legal scrutiny
Once the banks are satisfied with the status and the repaying capacity of the borrower, the banks do collect copies of the property documents for examination and opinion from their expert body.
]The bank’s advocate shall examine the title of the property right from its origin, flow and the present status. If the title is not clear, the application will not be entertained.
The banks will not sanction the loan even if the opinion is clear but the supporting original documents are missing since it may conclude that the property is either mortgaged elsewhere or having some other problem.

Margin money
Usually, the banks provide the loan to an extent of 85% of the total estimated amount of the plot or property or flats. The remaining 15% has to be arranged by the applicant and the loan will be sanctioned by the bank only after giving satisfactory evidence regarding his capability of mobilising that 15% of the balance amount.
The actual market value and the percentage of depreciation of the property will also be taken into consideration before the sanction of the loan.

Negative list
As sanctioning of housing loans is left to the wisdom and will of the banker, some of the multi-national banks do not entertain the loan applications from artists, police, journalists, politicians and  advocates.
Presently, the banks have stringent instructions on the  grant of housing loans from the Reserve Bank of India and the Finance Ministry.
Despite this, banks do entertain good proposals for the grant of housing loans.

The author is an advocate who specialises in property matters. 
He can be reached on E-mail : editor@realestatereporter.net  Ph: 25526644/45.