The maximum loan amount that can be granted to Central Government Employees under House Building Advance Rules after implementation of Sixth Pay Commission Recommendations is Rs.7.5 Lakhs.
We have already analyzed the benefits of House Building Advance in the aspects of low rate of interest and lesser monthly recovery in our previous article on HBA.
Click here to read Why HBA is better than House Loan granted by PSU banks?
But the maximum ceiling of Rs.7.5 lakh fixed for HBA Scheme is really a negative aspect as it would never meet out the cost of construction in this inflationary trend.
In this scenario, will it not be fine if we take full advantage of availing NBA, yet meet out the Cost of Construction?
How take to full advantage of HBA, yet fully meet out Cost of Construction?
Many of Central Government Employees drop the idea of constructing a house or acquiring a house property for the reasons that HBA granted does not meet out the cost of house.
Some of them borrow entire loan from PSU banks. Alternatively, it would be better to create second charge for receipt of additional loan from PSU banks in addition to HBA to meet out the cost.
We feel that both of these options are not correct as Government permits second mortgage viz, receipt of additional loan over and above the HBA granted by it. So, it would be prudent to go for a second loan over and above the HBA to meet out the cost.
For instance, you are eligible for the maximum HBA amount of Rs.7.5 lakh. The maximum ceiling amount for cost construction or cost of house in the case of acquiring ready built house or flat is Rs.30 lakh. If you have planned to construct or buy a house at the cost of Rs.30 lakhs you can very well avail second loan for the differential amount of Rs.22.5 lakh depending upon the procedures followed by the bank that provides the second loan.
Central Government employees can receive additional loan over and above the HBA by creating second charge on the property. The conditions are:
- The second loan must be obtained from only from Banking Institutions (PSU Banks and private banks approved for house loan operations)
- Financial Corporations set up by State Governments
- Co-operative housing finance Institutions
- Public Limited Companies formed and registered in India and approved for house loan operations for National Housing Bank viz., HDFC, Canfin Homes Ltd etc.
- The amount of HBA granted and the second loan received put together should not exceed prescribed cost ceiling (Rs.30 lakhs)
- The second charge created can be transferred by the employee to another financial Institution based on market conditions
- However, at any point of time there should only one second charge. In other words, at any point of time there should not be more than one lending agency other than Government.
The following Office Memorandums issued by Government govern Creation of Second Charge on the House Property for which HBA is sanctioned by Government:
O.M.No: I/17011/4/82-H-III, dated 02.12.1982
O.M.No: I/17011/4/82-H-III, dated 19.09.1996
O.No: I-17011/11/1/2003-H,III, dated 04.09.2003