Finance options for properties -The Hindu Property Plus article by CA G Karthikeyan

Housing finance is an area where ambiguities exist – the very first, perhaps, is that housing finance can mean different things to different people.

Buying a house may be the dream of a lifetime to some, to some others it may be a tax planning instrument and to still others it may be just an investment – depending upon their income bracket.

When the objective of the investment itself differs from person to person, their perception of financing the investment and the cost will also vary.

The fact that the layman is not aware of the labyrinth of rules and regulations to be complied with prior to construction only adds to this and makes the situation complex and open to misinterpretation.

Housing costs have skyrocketed. At the same time, housing remains one of the basic requirements of every human being.

People buy apartments, invest in land, or prefer to build a home on the piece of land they call their own. While buying an apartment is comparatively easier, building from scratch entails a lot of ground work. One of the most important processes to be completed before the construction can start is to get an approval for the construction from the local/city municipal corporation.  This can be a taxing process in every sense.

Assuming that someone has constructed a home and simply wants to add a room or two more, the same laborious process of getting approvals must be followed again.

Obtaining approvals for additional construction is taxing because the additional built up area may not be substantial but the process of obtaining the approval could prove to be expensive.

Additionally, if the house owner wants to finance the construction with a loan from the bank, the approval becomes a must as no bank would advance funds against unapproved construction. Most house owners prefer to avoid the hassle of obtaining the additional approval and prefer instead to either finance the construction from own funds or to borrow from private financiers/housing finance entities. It goes without saying that these entities charge exorbitant rates of interest and escalate the cost of construction manifold.

The dilemma, of course, is to determine how to obtain affordable finance as well as timely approvals. Considering that affordable finance depends upon approved constructions, it would be a good idea to set up a single window clearance for additional construction approvals sought at the municipal corporation level.

This would ease the glitch and allow faster movement of papers for approval.

It would also serve a two-fold purpose in that it would encourage people to seek approval and prevent unapproved construction while at the same time ensuring availability of affordable housing finance.

It must be noted that currently unapproved constructions constitute a significant portion of the housing scene in India. While one does not endorse unauthorised or unapproved construction, it must also be said that easing of the rules will, to a large extent, lessen/resolve this issue.

(G. Karthikeyan, a Coimbatore-based chartered accountant)