Can a Contract-Based Working Individual Get a Home Loan in India?

Updated on: 14 Dec 2021 // 19 min read // Home Loans
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Every individual dream of owning a house where they live peacefully with their family; however, to realise that dream you need an affordable Home Loan and a stable source of income.

While getting a Home loan is comparatively easier for a salaried person with a fixed monthly income base, it is not a piece of cake for a Contract-based working individual. The latter doesn’t have a fixed income source at his disposal while the former enjoys a promise of regular paycheck every month.

But this doesn’t imply that a contract based working individual cannot avail a Home Loan. Many banks and NBFCs offer Home Loans to self-employed and contract-based individuals. However, they follow some stringent background check mechanisms before approving the loan.

Most of the leading Home Loans as HDFC Home Loan, PNB Home Loan and alike, have inclusions for granting Housing Loans to self-employed and contractual workers besides the salaried individuals.

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Before applying for a Home Loan for self-employed or a contractual employee, you must understand that your eligibility is assessed to evaluate your repayment capacity. Apart from your business type, continuity of business will also matter. Having work experience helps a lot.If you have been continuously employed for the last 2–3 years (with the same or different employer) it will become easy for you to get a Home Loan. Though, this is not a mandatory criterion.

Further, let’s understand how different situations and various factors affect the Home Loan application of Part-Time Workers in India.

Scenario 1: First Line of Work

Let’s say, Nishant Sinha after completing his Graduation degree last year, is currently working ‘on contract’ with a company and he is working with the same client for six months. Now if he decides to avail a Home Loan, there is a great chance that his application may be rejected. This is because the finance company is not sure if the employment is permanent in nature. And therefore, it would not want the loan repayment to suffer in case the employment contract is terminated thereby rendering the individual unemployed. The bank or the Housing Finance Company are likely to feel apprehensive about their likelihood of shifting jobs or careers.

Scenario 2: Sufficient Experience

In another situation, if the same individual has been into his line of work for 4-5 years, it would have reflected a degree of continuity in his career. And thus, the application will not be rejected at once.

Here is the list of things the lender would assess before approving the loan:

  • The continuity of work
  • The continuity of work with the same clients/companies
  • The credibility of the employer
  • The past appraisals or profits

Scenario 3: Professional degree

If you have a professional degree like Chartered Accountancy or MBBS or alike and are working on your first contract in the line, your Home Loan application holds much weight.

A professional qualification adds credibility to the individual’s capability to generate a stable income stream. The lender is likely to take a stand that even though the individual is in his first job, he may find another job without hassles.

Scenario 4: Middle-aged Individuals

Your age is another factor that is considered before approving a loan application. If the applicant in the middle age group is working part-time or on a contract, the lender will assess why you have not been able to get permanent employment by at that age. This can be a negative assessment and become a hindrance for loan approval.

So, the lender would ask for your previous ITRs and also look at your work history before granting the loan.

As a contract based working individual, you can definitely Get a Home Loan. However, it is imperative to know about the credit assessment strategies of the Banks and Housing Finance. You must be willing to share your statements of accounts and last two years’ ITR forms to avail the home loan. Likewise, be ready to shun out more on the interest rate of the Home Loan. Besides, your credit history and relationship with the bank will also matter.

In short, we can cite your home loan eligibility factors as:

  • Continuity of work
  • Profession/Occupation
  • Employer Reputation
  • Age
  • Credit history
  • Rapport with the Bank.

Nevertheless, you can always seek the help of financial services distribution companies and compare available offers in the market.

Also Read: Tips to Get a Home Loan For Under Construction Project

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