vipul.jindal

Dear Bipul,
My suggesstion will be even in CLP, when the bank partially disburses the loan, ask for full EMI Option. Assuming the construction will take 2 years for completion, then it makes wise sense for you to start full emi. Your EMI will constitute the interest accrued on the disbursed amount (commonly known as Pre-EMI) and the rest will go towards reduction of principle. Thus in 2 years you will disburse quite handsome amount of your loan. Also your 20 year loan will reduce to 17 years. And the interest paid in 2 years you can get rebate for 5 years.

Please check the article on way2loan.in . The only drawback here will be that you will not get any tax advantage of principle repayment (only during construction period), that is lost for ever.
Hope it clarifies.
Vipul

ankitmittal14

Hi Vipul,

if banks are not ready for full EMI option, then as someone said in earlier reply, we can do prepayment of some part of principal either monthly or regular interval..

do you still think full EMI is better, if yes why..as some of private banks are not giving full emi options and suggesting to do same as i discussed above..

please advise..

vipul.jindal

Hi ankit,
Surprised banks dont allow full EMI in CLP (Construction link plan). However even if you are true, banks dont allow part payment/pre payment of principal of loan till entire loan amount is disbursed. So if you have taken a 20 Lacs loan, and under CLP 15 are only disbursed then banks will not accept pre payment till entire 20 L is disbursed. (even there is 0% prepayment charges, check this in ur case as pvt lenders have pre payment charges) Hope this clears your doubt.

Now ur second doubt: It is always better to start will full EMI. I believe its the best option. Thats so as you are repaying the principal loan quickly. which is not possible in full disbursement. So if you start full EMI, you pay principal quickly. However the negative is that you wont get any benefit in tax planning (under section 80C).

More explanation given in website www.way2loan.in do visit the site and register ur queries.

Disclaimer: my friend own this site.

hagarwal

One more doubt. Say i need a loan of 20 lakh and my bank allows me for only pre-emi option. Meanwhile after disbursal of 10 lakh loan ( considering CLP) i get a huge bonus of say 5 lakh from my job and i decided to pay that in my next demand from builder and thus taking only 15 lakh as loan from bank.
Wouldn't that also help us to rduce loan amount, that was our first motive?

vipul.jindal

If you are getting disbursing the loan for 15 lacs only then you need to inform the bank that that you will not be availing the loan for entire 20 Lacs. Thus bank will start the full emi, however you should submit the posession certificate of the corporation/builder.

Pvt banks are more rigid on ths as their margins and net interest income reduces, however PSU banks allow this freely. Hope it servs

hagarwal

I wasn't aware about this, so when should one need to communicate this to bank, because no one is sure about flow of incomes in future. And i guess 'posession certificate' would only be availiable after completion and possession, so how does this is sort out?

vipul.jindal

Hi Hagarwal,
Just imagine you are paying pre emi on 10 lac disbursal to builder (out of 20 Lacs loan). ANd imagine you get a reward from KBC for 25 lacs. and you self fund the property. No further disbursals.

How will bank come to know when to start the EMI. ANd you will be loosing the whole money just as interest as you cant claim this in tax rebate nor you are paying the principle. So Posession certificate is most important document for you as well for bank.

This is the only option with the bank. this is very specific from bank to bank. Some bank will start your full emi based on your communication/ call also. however completion certificate is most important document.

ankitmittal14

Once you notify bank, I am not taking further disbursement, they will start EMI..but vipin might be correct, bank may ask you possession certificate..