How do banks decide on the amount of home loan to be given?

  • Harsh Roongta
  • Updated: Mar 12, 2016 20:05 IST
Home real estate finances and bills (Istock)

How do banks determine how much loan they can give to a home loan applicant? How is it ­decided?

– Rajat Guha

The home loan eligibility for a particular property is determined by the bank based on the valuation by them through valuers they appoint. Your loan eligibility is also based on your income, your regular outgoings and repayment track record. Your overall loan eligibility will be restricted to 80% of the agreement value or the valuation as determined by the bank, whichever is lower.

I am salaried and want to know if I should take a joint home loan and what the tax implications will be.

– Sumit Kumar

It is a good idea to buy a property in joint names so as to avoid any title issues later. The joint owner has to join as a co-borrower when applying for loan. In case the second person is also earning, this helps you improve your eligibility in terms of the loan amount. If the loan is taken in joint names and the house is self-occupied, both applicants can claim the deduction under Section 24 (B) upto the limit of Rs 2 lakh each. Both persons can claim deduction under Section 80 (C) for repayment of principal portion of home loans.

What is the time allowed between plot purchase and construction if I have applied for home loan?

– Suresh Rana

Different banks have different clauses for start of construction. Most banks allow a gap of one to two years, within which, the construction must begin. If you construct the house within a year from purchase of the plot, the bank may give you home loan including cost of plot of the land. No tax benefits are available in respect of loan to buy a bare plot or in any year during which the construction is not complete.

My wife has a home loan which, I feel, is expensive. Can we get Rs 15 lakh each from a nationalised bank and claim tax exemption?

– Yash Bajaj

It is not possible to get two separate home loans on the security of the same property. Alternatively, you can avail a joint loan with your wife if your incomes can justify the higher loan amount. You can get the tax benefits on the loan repayments provided you are a owner or a co-owner to the said property.

Harsh Roongta is a SEBI registered investment adviser. He can be contacted on

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