Keeping in mind the staging of the home loans that are now priced below the 7% per annum level, it has been observed that most buyers find it rather lucrative when it comes to purchasing a property through housing finance. Having said that, the easily available housing stock in the resale market becomes a rescue option as it’s quite convenient to purchase a property and move in without the need to wait.
However, getting a home loan for resale flats is another ball game altogether in the secondary market, and it’s not that easy as is for the under-construction properties, where home loans can be borrowed from banks. Here, for a resale property, the buyer is on their own and will need to evaluate the banks and find the best offer for themselves.
This is why the buyers need to familiarise themselves with the home loan for resale flats. To help you out, here is a detailed guide to finding answers to all your questions regarding the same. So, let’s get started!
Eligibility Criteria For a Home loan Of a Resale Flat
Two home loan eligibility criteria are taken into consideration when determining the home loan for resale flats:
1) The Age Of The Applicant
For a resale flat, it is mandatory for the borrower to at least be 18+ when applying for a home loan in India. This is because the banks tend to offer a loan for a resale property till the working life of an individual. That means, irrespective of when you plan to take a home loan, the tenure of the repayment automatically ends at the time of your retirement, that is at the age of 60.
Nevertheless, the financial institutions might stretch to a longer period, depending upon the credit score, repayment capacity, mortgage insurance, and the borrowers negotiating tactics.
2) The Age Of The Property
In a few markets of India, it might not be feasible to purchase a new home.
For instance, in Delhi and Mumbai, all real estate transactions take place in the secondary market due to less availability for new developments. This makes the resale home finance even more crucial for the lenders just as for the new supply segment. Here, the leading banks offer home loans for old homes.
However, the age of the property is still taken into consideration when the institutions assess the home loan application. That means, for a home loan requested for a house that is not in the reliable condition is not taken into consideration, whereas, a property that is well maintained has a higher chance of getting a home loan.
How Much Home Loan Can Be Expected On Resale Flats?
A home loan for a resale flat is determined by the banks, only if they find the property worth the home loan request. For which, you can expect them to send a technical team across in order to evaluate the property in question. Nevertheless, banks won’t offer anything more than 80% of the property’s cost as the loan amount.
In most cases, this process could turn into a rather problematic one. Why? Irrespective of the age of the asset, the properties located in old and established areas tend to be the prime residential markets in India, therefore, are priced much higher than new properties in the peripheries. This means, the seller could ask for a high price, while on the other hand, the bank would offer less.
In either case, the buyers should take into consideration that they might have to contribute much higher from their own funds if the bank refuses to lend the amount you sought in the first place. This is why, it’s always recommended to arrange at least 30% of the property’s value from your own pocket as, unlike the under-construction properties, the tenure could also be shorter.
Home Loan For Resale Flats: The Initial Required Documents
If you are looking to apply for a home loan for an old house, it is mandatory to have an agreement signed between the buyer and the seller. This is where, as per the terms and conditions of the agreement, the bank could approve the application.
Therefore, the documents that are needed to buy an old house are:
- The signed agreement
- A duly filled application
- All documents that establish the ownership of the property since its inception, if held by various owners. If not the first allottee, the original documents of the subsequent sales
Note – If the flat is part of a builder-owned housing society, the sale agreement needs to be endorsed by the builder with a no-objection certificate for the proposed sale.
Is GST Incurred on the Purchase of the Resale property? And, What are the Tax Benefits?
GST or the Goods and Services Tax is applicable only on under-construction properties. However, there is a GST that the buyers will have to apply for when filling the home loan applications. This is because the financial institutions offer services as part of home loans, such as the processing fee, technical valuation fee, and legal fee.
Under Section 80C, Section 24 (B), Section 80EE, and Section EEA of the Income Tax Act of India, the rebates for the payment of home loan principal and interests are available to the borrowers. Additionally, all the tax benefits that are offered to the buyers of under-construction properties are also available to buyers of old properties.
In both cases, the determining factors would be the income slab, the loan amount, and whether or not the house is your first purchase to avail of, under various sections of the income tax laws.
What Documents Are Required To Apply For a Home Loan For a Resale Flats?
Listed below is a list of documents that are needed to apply for a home loan of a resale flat:
- Home loan application form
- Copies of ID proof such as Voter’s ID, Aadhaar card, Driver’s license, Passport, etc
- Copies for address proof like the electricity bill
- 2 passport-size photos of the applicant are required during the home purchase process. Keep at least two of them handy to go with the home loan application.
- Property related documents such as Immediate title deed, Chain documents, Copy of agreement of sale, Copy of the sale deed, Property tax payment receipts, Nil-encumbrance certificates, Copy of the approved building plan, and No-objection certificate from the builder
- Income assessment document proofs such as a copy of PAN card, Bank statements for the last six months, and Income tax returns for the last three years
- Employment-related documents – Copy of appointment letter, Salary slips (for salaried employees), Proof of business income (for self-employed and business owners)
To Conclude: What Banks Offer Home Loan For Resale Flats and Old Properties?
As mentioned in the article above, the secondary market segment is equally important for banks, which is why most leading banks offer loans to resale properties. And, there are no interest rates on these loans for old properties, whatsoever.
To name a few banks:
- ICICI Bank
- Axis Bank