To help readers keep pace with what’s happening in the real estate sector, Mint’s Q&A will appear every other Monday.
Is it safe to apply for a self-constructed house versus a builder flat, as there are cases of withholding/reducing two or three instalments of self-constructed homes on flimsy grounds by surveyors and banks? Will the disbursed amount for self-constructed houses be treated as home loan under income-tax laws for the purposes of tax benefits? In the case of a partly disbursed loan, if takeover by another bank is arranged, will foreclosure charges apply?
If the owner has the necessary permissions required to self-construct the house, and the borrower is willing to follow the construction process as per plans, then there is absolutely no reason for the borrower to worry while applying for a loan for a self-constructed house.
With regard to the treatment of the loan for tax purposes, there would be no difference in the benefits that would accrue to the loan borrower in case of self-construction vis-à-vis a loan for a residential flat.
However, one should always consult a tax expert to understand the rules fully.
Even in partly disbursed cases, the borrower has to pay the required foreclosure charges if the loan is being refinanced.
I have a floating rate loan from a lending institution. The institution has reduced its prime lending rate recently. When will the new rates be applicable to my loan?
Various lending institutions may have different reset dates.
At HDFC, the reset date is every three months, which means that your rate comes up for review once every three months, based on your date of loan disbursement.
For example, assuming that it is an HDFC loan and your first date of disbursement was 12 January and the retail prime lending rate is revised on 1 February, the revised rate in your case will be applicable from 1 May. Let us take another example.
In case the disbursement was 12 November 2007 and the retail prime lending rate is revised on 1 February 2008, the revised rate in such a case would have been applicable from 1 March 2008.
Renu Sud Karnad is joint managing director, HDFC.
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