Thanks to swelling competition in the housing
loan industry, the home loan process in India has become
considerably streamlined. Despite shaking off the tag of a long
and tedious documentation process, the housing loan procedure
still requires one to go through certain mandatory stages.
After choosing a particular home loan, the customer submits the
application form to the housing finance company (HFC) along with
other relevant documents as required by the HFC. They comprise
documents to establish income, age, residence, employment,
investments, etc. The customer also needs to hand over a cheque
for payment of an up front (non -refundable) processing fee of
about 0.5-1% of the loan amount to the HFC.
In the next stage, HFCs validate the information provided by the
customer on the application form. They usually conduct checks on
the residential address of the customer, the place of employment
of the customer, and credentials of the employer. Some HFCs may
insist on a personal interview with the customer and perform a
reference check on the references provided by the customer on the
After due appraisal of customer profile, a sanction letter is
issued which contains details such as loan amount, rate of
interest, annual / monthly reducing balance, tenor of the loan,
mode of repayment and general terms and conditions of the loan.
The customer is required to leave the entire set of original
documents pertaining to the property being purchased with the HFC
as security for the loan amount sanctioned. These documents remain
in the custody of the HFC till the time the loan is fully repaid.
Once the documents are handed over to the HFC, they send all the
documents for a thorough legal scrutiny.
Prior to disbursement, the HFC also conducts a site visit to the
customer's property to ensure that all construction norms have
been adhered to properly. Once the HFC is satisfied that the
property is legally and technically clear, they disburse the loan
amount. The disbursement from the HFI is on the basis of the stage
of construction of the property.
Until such time that the entire sanctioned amount is not drawn,
the customer will pay a simple interest on the Actual Amount drawn
(without any principal repayments). The EMI payments will commence
only after the entire Sanctioned Loan Amount is drawn.