HOME LOAN OR LOAN AGAINST PROPERTY

• Home Loan: Specifically sanctioned for purchase of a new house, construction of property, purchase of a plot (with conditions), or major renovation of an existing house.
• Loan Against Property (LAP): Multi-purpose loan where the borrowed funds can be used for business expansion, working capital, higher education, medical emergencies, wedding expenses, or any legitimate financial requirement.

• Home Loans: Generally offered for 10 to 30 years, depending on borrower’s profile and repayment capacity.
• Loan Against Property: Usually offered for 5 to 15 years, based on property value and loan structure.

• Borrower’s income, repayment capacity, credit score (CIBIL), age, and employment stability are major determining factors.
• The property must have clear and marketable title, free of legal disputes or encumbrances.
• Lenders also assess the Loan-to-Value (LTV) ratio, generally ranging from 60% to 80% of the property’s market value.

• The loan is secured against the mortgage of the property offered.
• The property remains in the borrower’s possession, but the lender holds the right to enforce security in case of default under the SARFAESI Act, 2002.

• Interest may be fixed or floating, linked to benchmarks such as Repo Rate or External Benchmark Lending Rate (EBLR) as per RBI guidelines.
• Additional charges may include processing fees, legal and technical valuation charges, prepayment charges (in certain cases), and documentation costs.
• LAP usually carries slightly higher interest rates compared to home loans due to multi-purpose utilization of funds.

Home Loan: Borrowers can avail deductions under the Income Tax Act, 1961:

• Section 80C: Deduction up to ₹1.5 lakh for repayment of principal.
• Section 24(b): Deduction up to ₹2 lakh annually for interest paid on self-occupied house property.
• Section 80EE / 80EEA: Additional benefits for first-time homebuyers, subject to conditions.

Loan Against Property: No direct tax benefits are available unless the borrowed funds are used for business purposes, in which case the interest paid may be allowed as a deductible expense under the head “Profits and Gains of Business or Profession.

• Governed by the Reserve Bank of India (RBI) under the Banking Regulation Act, 1949.
• Housing finance companies (HFCs) are regulated by RBI and earlier by National Housing Bank (NHB).
• Tax benefits are subject to provisions under the Income Tax Act, 1961.
• In case of borrower default, lenders may enforce mortgage rights under the SARFAESI Act, 2002 or approach Debt Recovery Tribunals (DRTs).