If you are planning or going to take composite loan from IDBI Bank then you should first read this article to understand about their different charges and policy guidelines which they will enforce irrespective of what you want. First of all, if you approach someone from Bank to get the information about the policy and guidelines and all the charges for applying composite loan then they will never given you all the information clearly and there will always be some hidden charge which you won’t get any idea until you really apply for it. Instead of getting shock at that time, it is better to understand all the charges beforehand, atleast what they have now.
Why You Should Never Take Composite Loan from IDBI Bank
Before getting into the details, you should first know what is composite loan? Generally there are three types of loan for which you approach the bank – plot loan, home loan and composite loan. Plot loan is basically the loan for buying a plot or piece of land. Home loan is either for ready to move in home or under construction home. And then the last one is Composite loan. It is basically a loan for both plot and construction of home. If you are going for composite loan then as per current IDBI bank rule, they can finance upto 80% of the total value depending on your current CIBIL score and any previous ongoing loan.
It is also important here to understand that if your composite loan is going to be greater than 70 lakhs then you need to pay extra charges which I will explain below. Another important point to note here that out of your composite loan amount, they will provide 70% loan for plot and 30% for construction. To understand this better, let’s take an example.
Assume that your current property value is Rs66,25,000, then 80% of Rs66,25,000 is Rs53 lakhs, which is the maximum amount of loan they can provide for plot and the rest Rs13,25,000 needs to be paid as down payment. Keep in mind that you need to submit the margin money statement as proof of down payment to sanction your loan. Margin money statement is nothing but the proof of down payment you did to the developer or builder.
Now under their composite loan criteria, they provide 70% of loan for plot which in this considered to be Rs53 lakhs and the rest 30% for construction which comes around Rs22.71 lakhs, take it round about Rs23 lakhs. So now the composite loan you need to take is Rs53 lakhs + Rs23 lakhs = Rs76 lakhs for 20 or 30 years depending on your requirement and eligibility. With this understanding, let’s come to the real fee for Rs76 lakhs composite loan for 30 years which you need to pay while processing the loan:-
- Legal Fee: Rs7906
- MODT 0.2% on the sanctioned amount: Rs16,000
- Agreement 0.1% on the agreement value: Rs7,425
- Documentation charges: Rs1500
- Processing Fee: Rs3186
- Admin Fee: Rs1180 (No Fee if composite loan is less than Rs70 lakhs)
If you are going first time for composite loan through some broker, salesperson or through some developer then they will never tell you correctly about above charges. Not even the bank SPOC will give you all this information correctly so it is important to note this point. They will also not tell you about the conditions which will be mentioned in your sanction letter.
For example – if you ask about the time period to start and finish your house construction to avail the tax benefits on interest then they might say bank provides 2-3 yrs of time to start your construction but in reality they provide 2 years to finish the construction as per their current rule. If you fail to finish 80% of your house construction as per your given plan then they will convert your composite loan to plot loan irrespective of what they have verbally committed to you with higher interest rate, the interest of which you cannot claim for deduction during your annual ITR filing.
If you are not aware what I am talking about then let me clarify this point. Usually, when you go for plot loan, bank will provide the loan at higher interest rate in comparison to composite loan and you won’t be able to claim any type of tax benefit on the interest paid whereas in composite loan as soon as your disbursement is completed, you will be able to claim the tax benefits on interest paid. So most of the time, salaried class people would go for composite loan as it will be more beneficial for them.
Coming back to the point, you might have other questions that you need to ask such as how about EMI that you need to pay as monthly installment. You will be amazed to know there is a very strange process they enforce on customers to follow which only benefits banks and not the customers. During your first disbursement, you will be asked to provide the approval to automatic deduct double the EMI amount from your salary account. While they claim this is not the real amount which will be deducted but who knows what they will do once you provide the mandate approval.
All this is done simply because if incase during any month you don’t have enough balance in your account then ECS that you set won’t able to deduct the EMI for that month and so you need to pay double the amount with 2% penalty of the EMI during next month. Not only this they will also ask you to give four signed cheque as on the payee name IDBI Bank LTD with no date mentioned, just your signature during processing of your loan. Can you believe it!! Who gives blank cheque !!
Another interesting fact that you probably won’t be aware that till the dispersal of full amount, you will only be paying the Pre EMI which is nothing but the interest over Rs53 lakhs with no principal amount deduction, just the interest. So essentially, your principal is not getting deducted and you will end up paying interest every month which you can’t claim or take any type of benefit. It’s just going in vain.
If you ask how to reduce the principal amount then they will tell you to do the Part payment which means you need to pay extra payment manually apart from Pre EMI to reduce the principal and that extra amount must be greater than Rs25000 as per current rule.
The most weird thing I noticed is that you have to send an email to deduct the amount from either savings bank account if you have it or else from suspense account which you need to open for part payment in case you don’t want any savings account.
So now you understand why you should never take composite loan from IDBI Bank. It has lot of hidden charges which they will not tell you until you apply for the loan. At the same time, if someone is planning to take loan then I have explained all the charges that one can expect to pay. Hope this gives you a good idea about entire composite loan process.