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By Dr. Sanjay Chaturvedi, LLB, PhD.
Repayment of Home loan, its principle and interest is eligible for deduction while loan against property is not home loan. It is treated as mortgage. Almost all banks falling behind lending to priority sector. Branches and agents fool you by offering home loan but actually its loan against property.
Surprisingly under construction properties also come under Loan Against Property. The rate of interest comes to above 14% p.a. cumulative while home loan interest ranges between 10 to 12%.
Many Banks and their agents on pretext to offer housing loan, sell loan against property while customer is given to understand that housing loan is disbursed. But the sanction letter says it is loan against property subject to 60% of the property value. Bank also devalue projects while under construction. Even though sanction is 80%, banks devalue the project and property and disburse only 60% making loan seeker run pillar to post for margin money. Banks also insist that borrower’s margin is paid upfront before they disburse.
Procedural lapses and grey areas identified by banks to retain all kind of customers. They do not deny loan but either give loan against property or devalue the property without any reason and disburse low leaving borrower to either start a fresh for loan process or accept the lesser amount of loan.
An advance processing with terms must be adopted for home loan because many bank credit manager who sanction are hand in glove and take bribes to get the loan sanction even though the profile is good. On pretext that the profile is not good and non availability of few documents, agents make a fear psych to loan seeker and ask for bribe.
Normally a loan sanction process should be closed within a week. If it is taking more than 7 days, just change your loan application and explore other options and bankers for home loan. Almost all nationalized banks offer many incentives like free loan processing etc. Bargaining you loan and interest is your right. If you have good CIBIL score, which is available by paying Rs450/- to CIBIL, just bargain your interest rates.