Under-construction: Home Loan Switching is Possible?

Shopping for the best rates might be a good idea to cut your EMI (Equated Monthly Instalments). However, if the house property for which you have taken the loan is under construction, it might not easy to transfer the loan.

For example, if you approach a bank / housing finance company (HFCs) that has not approved the housing project, switching may not be allowed, says a senior State Bank of India (SBI) official.

 “The decision depends on who the project developer is and current construction stage. We also check if the project is on schedule, if no, then how much the delay is. This is because most projects are stuck for a long time. And, in such cases, many borrowers don’t want to keep repaying the home loan when there is no surety on project completion.”

Even if you approach a bank that has approved a real estate project, it may not give a green signal for balance transfer if the project is running behind schedule for more than 2 to 3 years.

Securing a home loan transfer would also depend on whether or not you have been repaying your housing loan during the under construction period, says a private banker. “If an individual has been repaying a fixed minimal amount, we may not allow balance transfer as these borrowers may be high risk,” he said.

When you secure a housing loan for an under-construction house, you have an option to start repaying immediately (called pre-EMIs). The EMI to be paid will depend on the amount that has been disbursed.

You can also repay the entire EMI. Or, you could choose to start repaying once the entire disbursement is over or on possession.

If one has repaid a substantial part of the interest portion, banks / HFCs may deny switching because there is little revenue for it, says the private banker. Those who have been irregular with repayment with the current lender may also not be able to switch.

“If banks / HFCs do allow risky borrowers to switch, they may impose some restrictions. Such as, the borrower may not be allowed to re-negotiate loan terms such as extending the tenure for a lower EMI,” says an HDFC Bank official.

Also, such borrowers may not be allowed a top-up the loan.

Mr. Harsh Roongta, CEO, Apnapaisa.com, said, ''There could be some operational issues. You would need a no-objection certificate (NOC) from your builder / promoter to switch, which the builder may or / may not give. The NOC is required when borrowing. Some may ask for a no-due certificate from the previous lender to give a second NOC. Builders / promotres give an NOC at the time of buying of house without any fuss. But the second time around he may charge you for a second NOC”

And on completion of the project & society formation, the conveyance deed is not in favour of the society, then the house owner will need an NOC both from the builder and the society, Mr. Harsh Roongta also adds.

Share: