You will get a number of options available with regards to financing your home. These include self-construction loans and home loans. Each of these has unique characteristics, advantages, and disadvantages. Here we will discuss in detail a good choice you can make. Thus, you will be able to choose one that fits your financial situation, tax planning techniques, and goals for buying a home.
In this post, we will look at a comparison between housing loans and construction loans, such as some major features of housing loans. This will enable you to know exactly where to draw the line, thus telling them apart and, in turn, finding out which is most suitable for a certain need.
Top Home Loan Highlights 2024
| Bank/NBFC | R.O.I (Reducing Per Annum) | Processing Fees | Loan Amount | CIBIL Score |
| HDFC Bank Home Loans | 8.45% – 10% | 0.5% – 1% | 5.00 Lacs – No Limit | 650 |
| Kotak Bank Home Loan | 8.75% – 10% | N/A | 20.00 Lacs – No Limit | 700 |
| Bank of India Home Loan | 8.5% – 10.75% | 0.25% – Rs.10000 | 10.00 Lacs – No Limit | 675 |
| Canara Bank Home Loan | 9.25% – 13.8% | N/A | 10.00 Lacs – No Limit | 675 |
| Aavas Housing Home Loan | 9.9% – 18% | 1% – 1.5% | 25.00 Lacs – 5.00 cr | 650 |
| Bajaj Housing Finance Home Loan | 8.45% – 10% | 0.2% – 0.5% | 5.00 Lacs – 75.00 cr | 650 |
| PNB Housing Home Loan | 8.75% – 14% | 0.25% – Rs.10000 | 5.00 Lacs – 20.00 cr | 625 |
| Shri Ram Housing Finance Home Loan | 11.5% – 13% | 1% – 1.25% | 10.00 Lacs – 1.00 cr | 650 |
| We Rize Home Loan | 10% – 18% | 0.5% – 1% | 5.00 Lacs – 75.00 Lacs | 650 |
| Mahindra Finance Home Loan | 9% – 15% | 1% – 3% | 3.00 Lacs – 75.00 Lacs | 650 |
| Capri Global Bank Home Loan | 9.5% – 15% | 1.25% – 1.5% | 10.00 Lacs – 1.50 cr | 650 |
| Tata Capital Home Loan | 8.6% – 11% | 0.2% – 0.5% | 30.00 Lacs – 7.00 cr | 750 |
| Aditya Birla Home Loan | 8.9% – 11% | 0.5% – 1% | 25.00 Lacs – 25.00 cr | 675 |
| Piramal Finance Home Loan | 10.5% – 14% | 1% – 1.5% | 30.00 Lacs – 5.00 cr | 650 |
| Satin Housing Home Loan | 11% – 18% | 2.5% – 3% | 5.00 Lacs – 1.00 cr | 700 |
| Indiabulls Finance Home Loan | 9.4% – 10% | 0.5% – 1% | 20.00 Lacs – 5.00 cr | 675 |
| Federal Bank Home Loan | 8.5% – 10% | 0.5% – Rs.13000 | 50.00 Lacs – 20.00 cr | 675 |
| IDFC Bank Home Loan | 8.85% – 9.25% | 1% – 1.5% | 10.00 Lacs – 5.00 cr | 680 |
| ICICI Bank Home Loan | 8.6% – 10% | 0.25% – 0.5% | 50.00 Lacs – No Limit | 700 |
| Axis Bank (Asha Home Loan) | 9.9% – 14% | 0.5% – 1% | 5.00 Lacs – 1.00 cr | 700 |
| Yes Bank Home Loan | 9.4% – 10.5% | 0.25% – 1% | 50.00 Lacs – 10.00 cr | 700 |
| Yes Bank Home Loan (Small Segment) | 9.9% – 11% | 1% – 1.25% | 5.00 Lacs – 1.00 cr | 680 |
| Standard Chartered Home Loan | 8.5% – 10% | 0.5% – 1% | 25.00 Lacs – 25.00 cr | 700 |
| Jana Small Finance Bank | 10.5% – 13.5% | 1% – 1.5% | 5.00 Lacs – 3.00 cr | 650 |
| DCB Bank Home Loan | 9.75% – 14% | 0.5% – 1% | 30.00 Lacs – 3.00 cr | 650 |
| SBI Bank Home Loan | 8.5% – 10.4% | N/A | 10.00 Lacs – No Limit | 650 |
| Bank of Maharashtra Home Loan | 8.5% – 9.65% | N/A | 10.00 Lacs – No Limit | 675 |
| Indian Bank Home loans | 8.5% – 10.4% | N/A | 10.00 Lacs – No Limit | 675 |
| Union Bank of India Home Loan | 8.5% – 10.8% | N/A | 10.00 Lacs – No Limit | 675 |
| Central Bank of India Home Loan | 8.5% – 10.4% | N/A | 10.00 Lacs – No Limit | 700 |
| Bajaj Finserv Home Loan | 8.5% – 10% | 0.2% – 0.5% | 20.00 Lacs – 15.00 cr | 700 |
| L & T Finance Services Bank Home Loan | 8.5% – 9.5% | 0.25% – Rs.10000 | 30.00 Lacs – 3.00 cr | 650 |
| Vistaar Finance Home Loan | 13% – 21% | 2% – 2.5% | 5.00 Lacs – 50.00 Lacs | 650 |
| IIFL Bank Home Loan | 8.9% – 14% | 1% – 1.25% | 5.00 Lacs – 50.00 Lacs | 650 |
| Aadhar Housing Finance Home Loan | 10.5% – 14.75% | 1% – 1.5% | 5.00 Lacs – 70.00 Lacs | 600 |
| Axis Finance Home Loan | 9.5% – 11% | 0.5% – 1% | 30.00 Lacs – 10.00 cr | 650 |
| Fullerton (Grahshakti Home loan upto 75 lac) | 10.5% – 16.5% | 1% – 1.5% | 10.00 Lacs – 75.00 Lacs | 650 |
| Hero Housing Home Loan | 10% – 11% | 0.5% – 1% | 20.00 Lacs – 5.00 cr | 650 |
| India Shelter Home Loan | 13% – 20% | 1% – 2% | 5.00 Lacs – 50.00 Lacs | 500 |
| Shubham Housing Finance Home Loan | 10.5% – 14.75% | 1.5% – 2% | 5.00 Lacs – 50.00 Lacs | 450 |
| DMI Housing Home Loan | 11.5% – 14% | 1% – 1.5% | 5.00 Lacs – 75.00 Lacs | 650 |
| Vastu Housing Finance Home Loan | 10% – 15% | 1% – 2% | 5.00 Lacs – 3.00 cr | 650 |
| ICICI Home Finance Home Loan | 9.5% – 11 |
Read Below and Learn How to Use a Housing Loan
A house loan, also commonly known as a housing loan, is a type of financial agreement made to purchase real estate that is already constructed or ready to be occupied.
Let Us Explore the Important Features of a House Loan:
The purpose of the home loan is to purchase residential property, such as houses, apartments, or lots with existing structures.
Loan Amount: The loan amount depends on the policies of the lender, your financial stability, the market value of the property, and your annual income. In a housing loan, you are allowed to borrow up to 80-90 percent of the value of property.
Interest Rates: There are two types of interest rates for housing loans, namely fixed and floating. Floating rates move with the financial markets. Fixed rates remain fixed throughout the tenure of the loan.
Payback Period: A house loan allows a longer period of payback, normally between 15 and 30 years. A longer tenure reduces the EMIs, but because of that, the total interest paid may be higher.
Tax Relief: In this regard, specific tax benefits under Sections 24(b) and 80C of the Income Tax Act are relevant in the case of borrowers of a housing loan. This includes exemptions both on the interest of the loan and the principal repayments thereof.
A Few Matters on Self-Build or Self-Construction Loans
A self-build loan is meant for those intending to start at the very foundation of their home construction. In that case, the loan is customized to fit the specific demands of construction workers. What you need to know about self-building finances includes the following:.
A self-build loan is meant and intended solely and exclusively to finance the construction of a new house to be erected on property you already own.
Loan Money: Loan money is paid out in steps or in part as the building phase advances. As much as 80–90% of the building costs may come from loan providers.
Interest Costs: Just like a housing loan, a self-construction loan can have fixed or variable interest rates.
Tax Benefits: A self-construction loan is entitled to tax benefits under Sections 24(b) and 80C of the income tax law, similar to a housing loan. One can claim deductions for interest charged over the construction period as well as the principal payable.
Housing Loans and Self-construction Loans Differ in the Following Factors:
Category of Property: The kind of property a certain loan finances is the huge difference. A self-construction loan serves to finance the building of an entirely new house on the land you own, while housing is meant for one that is already pre-constructed or ready for occupation.
Loan Disbursement: While a self-construction loan is disbursed in installments, with the progress of the project, a home loan gets disbursed in one go at the time of purchasing property.
Interest Charges: Both types of loans are available with both fixed and variable rates of interest; however, your ultimate expenditure will depend on your selection regarding the choice and market conditions.
Selecting the Best Loan Option for You
Take into account the following aspects while deciding between a self-construction loan and a housing loan:
Your Project: If you want to build your own home from the ground up, a self-construction loan makes sense. A housing loan is better suited for buying a property that has already been built.
Finance and Budget: Evaluate your financial situation and budgets. The money from a self-construction loan gets paid out gradually, which is advantageous for managing building costs. A housing loan offers a one-time payment for the purchase of residential property.
Ability to Repay: Assess your financial situation to ascertain the length of loan that you can afford. Although shorter terms may result in higher EMIs, the overall interest costs are reduced.
Tax Management: Take into consideration your goals for tax planning. While self-construction loans allow deduction during ongoing construction, home loans offer instant income tax advantages.
Property Site: Evaluate your land’s connectivity and location. Make sure it satisfies all legal criteria and has the amenities needed for building.
The Basic Distinction Between a Housing Loan and a Construction Loan
| Key Factors | Home Loan | Home Construction Loan |
| Purpose/ Property Category | To buy a property that is pre-built or ready to move into. | To loan funds for building a new house. |
| Disbursement | Lump sum paid while buying a property. | Disbursed gradually as the building project progresses forward. |
| Application Requirements | Property details, income proof, credit score. | A copy of your comprehensive building plans, specifications, budgets, and contractor information can be requested. |
| Loan Repayment | It starts as soon as the loan is disbursed. | Repayment of the construction loan is made in installments corresponding to different phases of the project. |
| Loan Tenure | Usually between 15 and 30 years. | Shorter term while building, usually switching to a standard HOME LOAN after it’s completed. |
Other factors to Think About When Selecting the Best Option
Reviewing the terms and conditions and fine print of the financial institutions providing self-construction and housing loans is crucial.
- Check interest rates as well as other related expenses, such as processing expenses and prepayment penalties.
- With the use of this information, you can look for a lender that provides the best terms, thereby saving you money.
- When making a choice, keep your financial stability and capacity for risk in mind. While a housing loan gives simple and instant property ownership, a self-construction loan might come with a shorter repayment term and higher interest rates.
- But it can also give you an overwhelming feeling of satisfaction as you see a home of your dreams take shape.
Many people aspire to own a home. However, you can be trapped between a house loan and a construction loan, especially when it relates to financing your property. Knowing the distinction between a construction loan and a housing loan is essential to helping you make a smart decision that fits your financial situation, tax planning techniques, and aspirations for owning a home.