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How are housing loans disbursed? 1. Sanction Letter : After your application has been scrutinised, the Bank will issue letter for the amount of loan and the terms & conditions governing that loan. We would like to point out that this sanction letter typically is for a fixed period and sometimes if the loan is not drawn down during that period, the Bank may charge you an additional fee for extending the validity of the sanction. Thus, it is in your interest to draw down the loan as early as possible after the same has been sanctioned. 2. Banks can sanction a loan linked to a particular project or leave the discretion of the project to you. However, even, in the latter case once you have decided on the project, the Banks will scrutinise the project and satisfy themselves that a loan can be extended for the project that you have in mind. We would like to recommend that you finalise a project before applying for the loan, as this would give you a better idea of the exact quantum of loan required and help you clear your application accordingly. 3. Once the project and the loan are approved, you have three options for drawing down the loan. a. Payments linked to construction milestones - Under this option, after you have paid your contribution of the house value (as may be determined by the Bank extending the loan to you), all construction milestones related payments made by the Developer would need to be submitted by you to the Bank. On the basis of this, the Bank will issue cheques of the required amounts, which will then have to be given to the Developer. Interest would be payable by you from the date of drawing down any part of the overall sanctioned loan, till such time as the regular EMIs for the loan commences. This interest is called pre-EMI interest and is generally at the same rate as the rate agreed between you and the Bank for the housing loan. Reputed developers and Banks normally have a tie up, which ensures that cheques to be given to the Developers are straight away delivered by the Bank to the Developer without your having to intervene personally and physically carrying the cheque from one Bank to the other. In fact, should you be agreeable to issuing the POA, we can ensure that the payments are remitted directly by the Bank to us on the due dates as per the physical milestone without our having to bother you in any way whatsoever. b. For some projects, Banks are willing to provide the entire loan amount irrespective of the stage of construction. Thus the Developer gets the entire value of the constructed flat even though the entire construction is not over. The advantage to you is the fact that you would get a price discount. Needles to add, you would have to pay interest on the entire loan disbursed from the date of drawing out till the date the regular EMIs commence. What you need to compare is the net present value of the incremental interest amount that you would be paying to the Bank vis-à-vis the quantum of discount being offered to you. c. Mahindra Lifespace Developers Limited pioneered unique pre-EMI interest scheme for the benefit of its customers. For this scheme for most of our projects we have a specific tie up with one institution / Bank. Under this scheme, you are called upon to pay only the initial booking amount and stamping / registration charges, when you book your flat. After the partner Bank for the scheme approves your housing loan application, Mahindra Lifespace Developers Limited should receive the entire payment of the house from the Bank concerned. Unlike the ADF facility, however, you are not called upon to pay the pre-EMI interest. In this option, Mahindra Lifespace Developers Limited bears the pre-EMI interest till the house is ready for possession. The scheme is of great benefit to the customers living in rented premises, as such customers normally have to pay a rental amount and also need to pay the pre-EMI interest which puts the monthly budget of our customers under some degree of strain. Under this scheme the interest component is not payable by the customers. However, depending upon the project the basic price of the house is enhanced to enable us offer you this scheme. 4. Pre-payment: Most Banks tend to discourage pre-payments of loans. However, partial pre-payments are allowed. It is in your interest to examine the pre-payments clauses in the agreement, especially if your anticipate that sometimes in the near future you would be able to make substantial or complete pre-payment of the loan on account of anticipated inflows.