Convert composite loan to site loan


#1

A year ago I had taken composite loan of few lakhs. Considering the fact that for composite loan construction should be started by 2 years, due to various reasons including financial reasons, I will not be able to start construction in the plot. So for the same reason can my composite loan be converted to site loan? Now after few years if I will be able to construct then can the loan be reconverted to composite or home loan?


#3

Hi SSV,

Most banks will ask you to start construction on the plot within 18 months of loan disbursal. If they find that construction has not commenced, they will convert the loan to a land loan and relevant interest rate will apply.

We suggest that you check the terms and conditions of your composite loan. If the terms and conditions allow for an extension, you can go ahead and extend the date of your construction. You must check with your bank if you can’t find the relevant details. There might also be terms and conditions as regards pre-payment of your loan. There is usually a waiting period before which you might not be able to prepay the loan. Also, some banks convert the composite loan into a site loan if the loan is foreclosed. Speak to your bank and find out the details.

You should try to figure out how that additional amount was charged before you decide to take any action. You can check the terms and conditions to see if they are any pre-closure charges for closing your loan if you don’t construct a house. You can also check with your bank if the loan can be converted into a composite loan after you start the construction.

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Cheers,
BB Expert