First Time Housing Loan Customers- Part 3- Asset Quality

Thank you all for the response given to the last two blogs regarding first time housing loan customers part one financial discipline and Part Two Financial Capability of the customer

In our last two blogs I had discussed what banks or credit institutes look for while sanctioning housing loans. We saw how banks look into a proposal from 3 angles that is

1.           Financial discipline of the applicant or customers

2.           Financial capability of the customer

3.           Asset quality

we discussed in this blog series regarding financial discipline being the foremost and most important factor during credit appraisal for a housing loan. Also How Financial capability plays a role in ascertaining the loan quantum.

Today we will discuss about the Asset Quality which customer is buying or investing.

This blog series caters to Housing Loan only. So, customers invest in properties by two ways one is either direct purchase of flat or stand alone building and the other way is purchase of plot and construction there on.

So asset quality refers to the security with the customer offers to the bank for availing the housing loan. Banks are interested in the asset which is being acquired by the customer with the help of the loan. This type of asset is called primary security by the bank as the property is created out of the loan given by the bank.

Now banks will do their due diligence before accepting the property. This depends on the type of property offered by the customer. Some of the criteria is listed below

1. Flats/ ready to move in houses- Banks will see that the flat or house is made on an approved land, whether the flat or house is having approved plan from the concerned authorities of the area and flat or house has been made as per the approved plan. Also the flat or house is having all the basic amenities available or not. How is development of the area. The land where the construction happened is not coming under any dispute or is not under any government regulation.
2. Plots – Banks will scrutinize if the Plot is land Locked or not. Land locked plots are never approved for housing loans. (Land Locked means there is no separate access to the plot and the only access to the plot is through some other persons land). Also is it adjacent to any Rajakaluve (N.B- Rajakaluve refers to water resources and the flow of water into a lake, canal, pond, or other pooled water body, No construction is allowed within 25 meters of a Rajakaluve). Whether is plot is having all necessary approvals (i.e DC conversion if it is revenue land, certificate regarding Non agricultural usage etc). Whether the plot is having having approved Khata from the corporation (In Bangalore there are two types of Khata- A and B, A Khata lands are only sanctioned loan by Government Banks, B Khata lands are sometimes financed by some NDFC’s). Also there are many Green zones classified by Government and NGT where construction activities are not allowed as per laws.

The above are some of the points considered by the Banks while approving the Housing Loan.

If you want to apply for home loan in Union Bank of India, you can visit https://www.unionbankofindia.co.in/english/apply-online-home-loan.aspx.

If you are a first time Housing loan customer, I request you to please go through my all three blogs and make a wise decision. I am always available for any queries regarding Housing loans. Please comment or mail me on prabhatmoharana@gmail.com. Thanks