The dream of owning a home is a milestone that most of us strive to achieve. A way to accomplish this is to build your home from scratch. By doing so, you can customize your home to your necessities.
Moreover, investing in a residential plot of land has been an integral part of Indian households’ portfolios for a long time.
However, since the price of real estate in India is rising, getting a plot of land for residential purposes can be expensive. The ease of home loans at low interest rates eliminates this inconvenience.
If you intend to opt for a home loan to purchase a residential plot, here are some tips:
1. Assess the investment viability before obtaining a home loan for your residential plot.
Location is important when determining whether a piece of real estate is a wise buy. Look into the following before opting for a home loan:
- Plot location and its accessibility.
- Availability of basic amenities in the immediate vicinity.
- Plot location surroundings and neighborhoods.
- In the case of a developing region, the scope for further development
Analyze the plot area and determine whether construction is feasible.
2. Review the land documents.
It would help if you looked at the land records of the plot you intend to buy. The following are some things to look for when you do.
Title Deed
There should be a statement regarding the land’s purpose in the title deed – residential, commercial, and agricultural. There should be no ambiguous terms in the act.
Type of title
It would help to examine the title type, such as leasehold, freehold, or development right.
A certificate of encumbrance
Verify that the land does not have any pending legal cases or obligations.
Release Certificate
This certificate proves no outstanding loans on the land before reselling.
Occupancy Certificate
The seller must obtain an occupancy certificate before conveying the property to the buyer. When a buyer uses the property without securing occupancy, they will be subject to penalties under applicable laws in addition to the risk of demolition.
- Ensure that the seller has paid property taxes by contacting the municipal authorities.
- Enquire with the local authorities to determine whether approvals are pending on the land.
- Verify that the previous owners have not pledged the property as collateral.
3. Maintain an excellent credit rating.
Credit scores are a factor home loan lenders consider. A credit score indicates how well you have managed debt in the past. A list of loans you have taken, any defaults, if any, and their repayment history proof. A score that is near 900 represents good credit. A higher credit score will also help you get competitive home loan interest rates.
4. Debt to Income Ratio.
Your Debt to Income Ratio measures the percentage of your income to pay off any EMIs (Equated Monthly Installments). Usually, this amount is in portions. An ideal piece to maintain would be up to 40%.
Using a home loan EMI calculator on your lender’s website, you can calculate your EMI.
5. Your home loan will be easy if you have a co-applicant.
You can improve your debt-to-income ratio with a co-applicant and qualify for a more significant loan amount.
6. Apply for a construction loan to build on your land.
With the intent to build on the land, you can apply for a Construction Loan. By doing so, you can meet both needs at the same time. Construction loans are more easily obtainable since plots and houses or buildings add more value.
