Interested in Real Estate? Finding it difficult to invest in? Well, here are some pro tips for Investment Property financing in India.
Real Estate has always attracted investors. It has not only been a good investment strategy but also a good source of passive income. But the main problem which arises while investing in Real Estate is that of its investment. Investment Property financing is always a key to its investment because of its high mortgage. Not everyone is capable of purchasing the property. We all need some financing before the purchase. So here are few approaches towards Investment Property financing.
Before taking any loan for your property, these are some key points that you must consider.
The less the better
Try to minimize your loan as minimum as possible. If the property is of say rupees 10 lacs, you might get a loan sanctioned up to rupees 7 to 8 lacs. But this doesn’t mean that you’ve to indebt yourself with the entire amount. If you are capable of investing half the amount then do it. Take the loan only when it is required.
Search, think and invest
Do not take loans without proper research. Look for the investors around, find the minimum rate and then take loans from the least interest provider. Your lack of research may get you into a huge loss. So, dig deep and analyze better.
Keep the record clear
If you are getting a loan, make sure you pay your installments on time. Your credit score is very important for your future investment plans. Also, your present sanction of loan would depend on your previous credit score. Make sure you clear all your previous debts before proceeding into any financial investment.
Look for the best option
Try to take the loans from government banks as they have a lower interest rate and provide you a long time for the return. Housing finance companies are the second-best option to go with for residential investment.
Once you’ve cleared this thing, you’d get nearer to accessing your property. The next question which arises is what are you investing in? Investment Property financing can be majorly divided into two categories. These are a) home loans and b) commercial property investment. While getting a loan in any of these categories is different but what remains same are these key points.
- Your age must be in between 22-65.
- You must be an earning person. One can be either salaried, professional or a business person.
- You must have a clear background i.e. no pending E.M.I.s and credit card bills. If you have another loan going on, make sure you’re paying its E.M.I.s on time.
- Your E.M.I.s should not exceed the limits. This means that if you have a salary of say ₹1,00,000, your E.M.I.s can be maximized up to ₹50,000. If you have an ongoing E.M.I. of say ₹10,000 then you can take a loan only on the remaining ₹40,000.
These are some basic rules for Investment Property financing from the banks which are same for both the properties. These are some questions which would be asked before lending you the amount.
What kind of property are you investing in?
Is it a plot, a flat in a constructed apartment, a shop or an office? You may get Real Estate finance on plots and its construction together. You may face a little problem in financing if you are only purchasing an empty plot.
What is the value of your property?
Before sanctioning the loan, your property’s value would be estimated. Say if the loan you want is of rupees 10 lacs but your property holds a value of just rupees 9 lacs, your loan may get cancelled.
Who is the seller of the property?
If you are buying a flat or retail property in an under-construction building, your builder’s bio is important. What kind of status he or she has? If there is negative feedback then your loan may get cancelled.
What is the history of the property?
Before sanctioning the loan, the bank may get into a complete history of your property and inspect it closely. Are there any cases on its annexure? Is there any third party claim on the property or not?
Home loans are the loans taken for acquisition of residential properties. You may use the property to live in, to rent or other residential purposes. Home loans are easy to acquire. You may take a home loan to purchase a plot, a villa, an already constructed bungalow or a flat in an apartment. You may get a home loan single-handed and also in partnership. Before giving you a home loan, there are certain things which would be checked. These are
After clearing all these doubts, you are provided with a loan on your property which you may repay in time duration of 5 to 15 years.
Commercial property investment
Commercial property investment is difficult than home loans. While home loans are generally acquired by individuals, commercial loans are generally take in compliance, partnership or by firms. Commercial properties have higher interest rates than home loans. These properties work only on numbers which means while investing in residential properties, you may use it for personal purpose and may not care about its future value. But commercial properties are the ones which depend on the market. One downfall may make your property vulnerable. Thus, there is a great risk in investing in commercial properties. for acquiring commercial loans, the basics are the same as of residential properties but what makes it different are
- The interest rates of commercial properties are usually higher than of residential properties.
- G.S.T. is included while acquiring a commercial property which is not the case of residential properties.
- A partnership is majorly seen in commercial property investment which is generally less seen in home loan acquirement.
So, these are some tips about how to acquire a loan and what are various things on which one has to pay attention before getting a financial loan. Before taking any loan, make sure you are well aware of all the points mentioned above. Also, acquire information about various ways to invest in Real Estate and the strategies for investment.