Home Loan Valuation and Technical Problems & Solutions

Loan to Value Ratio (LTV)

 The Loan to Value Ratio (LTV) is calculated based on the valuation of the property. You cannot ask for any loan amount you want. Banks provide home loans based on the valuation of the house, which is commonly called LTV in short. Generally, banks provide home loans from 80% to 90% of the property valuation. For example, if a flat is valued at ₹50 lakh and the bank provides 80% LTV, then you can get a home loan of ₹40 lakh.

Yes, in smaller loan amounts like ₹20 lakh or ₹25 lakh, banks may provide up to 90% loan based on the property valuation. But if the property value is around ₹1 crore, then usually banks provide a maximum of only 80% loan. This LTV calculation is done by the bank’s technical team. In some cases, banks have their own internal technical team for valuation calculations. In other cases, banks hire external valuation agencies. These valuers visit the property, calculate the valuation, prepare a technical report, and submit it to the bank. Based on that report, the bank calculates the LTV and decides the final loan amount for disbursement.

Sanctioned Building Plan

We receive many customers who want to purchase a flat and say that the building does not have an approved plan even though all other documents are available. If you are buying a flat in a corporation area, then the building must have a sanctioned building plan approved by the corporation authority. If the property is located in a municipality area, then the municipality approves the sanctioned plan. The property is in a panchayat area, then the panchayat authority may approve the plan. So, a sanctioned building plan from the government authority is very important for getting a home loan.

However, there are some cases where loans are provided even without a sanctioned building plan. This usually happens in old properties where sanctioned plans did not exist at the time the building was constructed. But in such cases, there should be an Assessment Roll Copy (ARC). Normally, non-banking finance companies (NBFCs) may approve home loans based on the Assessment Roll Copy. Still, many premier banks do not provide home loans without a sanctioned building plan.

Completion Certificate

Suppose someone is planning to buy a flat in a standalone project. Normally, many banks do not provide home loans during the under-construction stage for such buildings. After the building construction is completed, the concerned sanctioning authority verifies the project and then issues a Completion Certificate. Banks usually provide loans only after this Completion Certificate is available. Premier banks especially follow this rule strictly. However, some non-banking finance companies (NBFCs) may still provide loans even if the Completion Certificate is not available and may consider other supporting documents.

Building is not as per the sanctioned plan

A flat building should always be constructed according to the sanctioned building plan. But many promoters and builders do something different. For example, they get approval for a G+4 building plan, but while constructing the building, they add one extra floor on top. Now, if you apply for a home loan to purchase a flat on that extra fifth floor, your loan may get rejected because that floor is not part of the sanctioned plan.

In some cases, builders design a floor plan for two flats per floor, but during construction they make three flats instead of two. In some places, they even make four flats. If you try to purchase such a flat and apply for a home loan, your loan application may get rejected.

You must pay serious attention to this issue because after booking the flat and signing the agreement, if your loan gets rejected, builders often do not refund the money easily. They usually claim that the building is constructed according to the plan and say there is no issue from their side. Sometimes they promise that they will modify or update the floor plan later, but this can still create major problems for you. Small builders who construct standalone buildings often do not strictly follow approved plans and regulations. Still, if there are only minor deviations, some NBFCs may consider the property and provide a home loan. Even then, you should first discuss the matter with the loan company before booking the flat.

Old Flat and Low Valuation

Suppose you are planning to buy an old flat that is around 15 years old. In such cases, compared to a new flat, the valuation usually comes lower, and because of that, the eligible loan amount also becomes lower. However, if the flat is properly maintained, freshly painted, and the building condition is good without any major issues, then the valuation may still come reasonably good. But ultimately, the loan amount will depend on the final valuation report.