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Expert: Harsh Roongta, Chartered Accountant, and a SEBI registered Investment Advisor.



Question: My friend applied to LIC Housing for a home loan of Rs12 lakh to purchase a newly built-up flat in Howrah, West Bengal. LIC Housing is telling him to find a guarantor on his behalf. Why should he find a separate guarantor since the property itself will be the bank as a mortgage?



Answer: The regular loan payment cannot happen by selling the asset. It has to be paid from the regular income of the borrower. Real Estate is not a very liquid asset and if the borrower chooses to be difficult he can really delay the sale of the mortgaged asset to pay off the loan. That is the reason you will never be able to get a loan based just on the value of the real estate collateral.



You will have to show the income earning capability to pay off the loan independent of the property value.  If your income is not sufficient in relation to the loan amount then the lender can ask for a guarantor.