Safety Comes First: Before a Home Loan, Check for Property Valuation


Many factors come into play when it comes to property valuation. The value of the property can include its utility (capacity to satisfy desires and needs of owners), monetary returns (market/rental cost etc.) transferability (the ease with which an ownership right can get transferred), and others. Before purchasing a residential property on a home loan, you must understand what it takes to manipulate its value.

Here are some factors that influence property valuation:

  1. Location

The most important aspect that determines property valuation is its location. Proximity to local amenities and infrastructure such as good transport, hospitals, and entertainment, employment hubs are likely to appreciate the price and utility of the property until some other aspects work to depreciate the land value such as legal problems to the area and others.

  1. Estate Size

The bigger the house, the higher may it cost or attract desirability for ownership, as the property is spread over a greater piece of land. This can be true or false, as there are many other factors that influence property size as a contributor to the final valuation of the same. Sometimes, even a smaller property size can yield higher returns or ownership desirability. To know why – read the below-mentioned point.

  1. Age and Renovations

Renovations and age are two factors that could appreciate or depreciate the property value. A well-maintained property, which adds value to habitation, may satisfy the owner or buyer despite its age. However, if the house is in poor condition, and old, then it may lower the level of valuation and related satisfaction.

  1. Taxation and Zoning of Area

Increased taxation pertaining to a property may decrease its value and vice-versa. The zoning of a region also plays a part in property valuation. For example, an area currently serving residential purposes can be rezoned as industrial later, which can cause an increase or decrease in its value or that of the adjacent properties.

  1. Neighbourhood

While purchasing a house, do pay attention to the neighbourhood or surrounding area. Houses built in developed areas can cost higher than that under-development. By development, it could mean the purpose served by the neighbourhood or land around (for example industrial, commercial or residential area), geographical stability (prone to natural calamities or not etc, which can influence insurance costs and home loan approval), infrastructure plans, and others.

  1. Population Influx

A property value can be judged by the population movement to it. For example, the outskirts of a city attract most employment opportunities, and then the value of commercial estates over here would increase. Similarly, if people who have higher disposable income prefer a particular area to reside in, it can raise the price of that certain property. If a property, though in the best location has seen some untoward activity, say criminal in nature, then its value may depreciate given the low desire for ownership of it.

Checklist for Getting a Home Loan:

  1. The property you are willing to buy must be verified by various authorities, and legally approved. Check with an insurer if the property qualifies for a home loan or not.
  2. Decide how to manage the home loan. Are you willing to pay EMI regularly? Which repayment option do you want to opt for?
  3. Avoid new credit applications, and late payments on a credit card, and do maintain a good CIBIL score. Also, limit using up a major part of your monetary savings prior to getting a home loan.
  4. Apply to borrow an amount you are eligible for. Use the home loan eligibility calculator to understand if you are an eligible candidate or not.
  5. Consider the expected turnaround time, fee and charges applicable (pre-payment of home loan, documentation, processing fee, later EMI payment etc.).
  6. Inquire about additional services such as free insurance cover to benefits such as lower interest rates (preferably possibly if you borrow from a bank you have an account with).

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