How to Get a Home Loan for an Under-Construction Flat: Step-by-Step Process

Buying an under-construction flat can be a smart investment—often cheaper than ready-to-move homes and with flexible payment structures. However, when it comes to financing such properties, there are a few extra steps compared to standard home loans. In this guide, we’ll walk you through the step-by-step process to get a home loan for an under-construction flat in India, along with eligibility, documents required, and tips to increase your chances of approval.

Step 1: Shortlist a Legally Approved Project

Before applying for a home loan, ensure the builder and project are approved by reputed lenders. Banks and NBFCs typically avoid disbursing loans for projects that lack legal approvals, RERA registration, or completion certificates.

Checklist:

• RERA registration number

• Building plan approval

• Commencement certificate (CC)

• Title deed and land ownership details

• Builder’s track record

Step 2: Check Your Loan Eligibility

Banks evaluate your eligibility based on:

• Monthly income

• Credit score (700+ preferred)

• Current EMIs and obligations

• Age (should be under 60 years at loan completion)

• Employment status (salaried or self-employed)

You can use online eligibility calculators to get a rough estimate before applying.

Step 3: Choose the Right Bank or Financial Institution

Compare multiple lenders based on:

• Interest rates (floating or fixed)

• Loan-to-value (LTV) ratio

• Prepayment charges

• Processing fees

• Disbursement flexibility (important for under-construction loans)

Top Banks Offering Loans for Under-Construction Flats:

• SBI Home Loan

• HDFC Ltd.

• ICICI Bank

• Axis Bank

• LIC Housing Finance

Step 4: Submit the Required Documents

Here’s a list of standard documents needed:

Personal Documents:

• PAN Card

• Aadhaar Card

• Passport-size photos

• Address proof (electricity bill, passport, etc.)

Income Proof:

• Salary slips (last 3–6 months)

• Form 16 or ITR returns (last 2 years)

• Bank statements (last 6 months)

Property Documents:

• Allotment letter from builder

• Sale agreement

• Project’s RERA number and legal clearances

Step 5: Get Loan Sanctioned (Sanction Letter)

After document verification and credit assessment, the bank issues a sanction letter that contains:

• Sanctioned loan amount

• Interest rate & EMI details

• Loan tenure

• Terms & conditions

Step 6: Loan Disbursement Linked to Construction Stage

Unlike ready-to-move flats, where the full loan amount is disbursed at once, loans for under-construction properties follow a stage-wise disbursement model:

Construction Stage	% of Loan Disbursed
Foundation/Plinth	15%–20%
Slab Completion (Floor)	20%–30%
Brickwork & Plastering	20%–30%
Final Finishing Stage	20%–25%

You’ll need to submit a BOQ (Bill of Quantities) or demand letter from builder to get each installment released.

Step 7: EMI vs Pre-EMI Payments

During construction, you have two repayment options:

1. Pre-EMI: Pay interest only on the disbursed amount. EMI starts after full disbursement.

2. Full EMI: Start full EMI immediately even if full loan isn't disbursed. Reduces overall interest burden.

   
   

Tip: Choose full EMI if your budget allows—it saves interest in the long run.

Step 8: Registration & Possession

Once the builder completes construction and obtains occupancy certificate (OC), you’ll:

• Pay remaining dues

• Register the property in your name

• Get possession

The loan transitions into a standard EMI-based repayment from this point forward.

Why Work With Construction Managers Post Possession?

Once your under-construction flat is complete and registered, it’s time to complete interiors and final execution. You can consult a professional construction manager for:

• Execution planning & contractor coordination

• Budgeting & cost estimation with BOQ

• Quality assurance & timely handover

FAQs – Home Loan for Under-Construction Flat

1. Is it safe to buy an under-construction property?

Yes, as long as it's RERA-registered and backed by reputed lenders.

2. How much loan can I get on an under-construction flat?

Usually up to 80% of the property's agreement value, depending on your income and credit profile.

3. Can I claim tax benefits before possession?

Yes, you can claim deduction on interest paid (Section 24b) after possession, in 5 equal parts.

4. What is Pre-EMI in under-construction home loans?

You only pay interest on disbursed amounts until full disbursement and possession.

5. How long does it take for loan disbursement?

Usually 7–15 working days after document submission and legal clearance.

6. Is insurance mandatory with a home loan?

Banks often bundle loan insurance for safety but it's optional, not mandatory.

7. What happens if the builder delays the project?

You may continue paying pre-EMIs. Some lenders offer partial relief under delay clauses.

8. Can I switch from Pre-EMI to full EMI midway?

Yes, but you’ll need to inform the lender and rework your EMI schedule.