For many who invested in under-construction flats in the last decade, their dream home remained just that – a dream. Financial crisis and several other factors halted numerous housing projects, especially after the outbreak of the Covid-19 pandemic, leaving many buyers stranded.
However, with intervention of the Real Estate Regulatory Authority, some of these stuck projects have seen a revival. With delayed construction and possession of properties, the homebuyers also face another problem of escalated cost.
Many homebuyers resort to additional amounts under their existing home loan to meet the escalated cost. Here are a few important factors you should take into consider before availing more funds under your existing home loan.
Updating contracts, evaluating eligibility
The initial step lies in updating your agreement to reflect the current circumstances and the increased cost. The revised ‘Agreement to Sell’ deed, prepared by the builder or the new builder, will outline the terms of sale, the sums already paid, and the increased costs. As always, the standard documents needed for a home loan remain pertinent.
Meanwhile, lenders will review your eligibility for the larger loan amount, scrutinising your present income, job status, credit score, and debt-to-income ratio. Since the risk assessment of the project was last done years back, banks need to restart the process, which might take a few weeks.
Loan transfer considerations and construction monitoring
In light of high-interest rates, transferring your loan balance to another institution offering lower rates could be a smart move. But, it’s vital to compare the costs related to the transfer with the expense of maintaining your existing loan. This includes processing fees, legal charges, and documentation fees.
On the bright side, the project’s revival should bring some relief. However, it’s crucial to keep track of the construction progress. If delays are causing financial stress, it could be a better decision to close your loan.
Recently, the Reserve Bank of India (RBI) has reportedly mulled over providing “special dispensation” to aid banks in offering extra finance to customers with restructured home loans. This could help banks release approved loans’ remaining amounts without denting their assets’ quality.
Simultaneously, the government is working with RERA and the SWAMIH Fund to expedite house delivery and bring stalled projects back to life. As the housing project landscape continues to evolve, homebuyers must stay informed and make prudent choices regarding their home loans.