When does one opt for a home loan? People tend to apply for a home loan to pay for a ready-to-move-in apartment/house or for a property under construction. However, if you wish to travel the road less taken, you can apply for a loan to pay for constructing your own home. Such loans are termed as ‘construction loans’ – and their approval and disbursement are different from that of a regular home loan.

How can you qualify for a home construction loan?

The below information will tell you everything you need to know before you apply for a home construction loan.

Criteria for availing of a Home Construction loan:


Besides your income statements and KYC, you will be required to provide a sales deed, an approved plan, ar No-Objection-Certificate (NOC) from an authorized development authority like the DDA or MHADA and finally, an estimate of construction cost certified by a civil engineer or architect.

Credit history

Your credit history is an important factor in your home construction loan application. This is something which remains constant for both a home loan or a home construction loan. A high credit score, ideally one above 750 will improve your chances of acquiring a home construction loan.

Credible developer

It is very important for a bank or a financing organization to know about the credibility of the builder - this helps them ensure that the once construction is underway, it will not halt due to any reasons. Banks or financing organizations also taken into account that the construction plan is pre-approved and followed by the builder.

Construction plan

Complete transparency between the lender and the applicant is very important to ensure a seamless and smooth disbursement of the home construction loan. The applicant must include all construction details including blueprints, inventory of material to be used for construction, for instance - it is helpful to include details like quality and quantity of tiles that will be used for flooring.

Before you consider applying for a home construction loan, remember that a loan for home construction is provided only for immovable works conducted for a house. This means you cannot apply or acquire a home construction loan for house painting, furniture, cupboards, kitchen cabinets, partition works, plumbing, lighting, etc.

Disbursement of a home construction loan.

The disbursement of a home construction loan happens in installments. Let's say this is similar to how you would pay the developer when you purchase a home under construction. However, a lender will not disburse any money until you (the applicant) will make your own contribution and provide proof of said contribution.

For availing disbursements from a bank or a financing organization, you will be required to submit photographs of the house and certificates from an architect or civil engineer signing off the stage of completion of the house.

Often, lenders will empanel an executive who will estimate the value of the land, along with the structure that is built, once every few months. Continued funding for the construction of your home depends on this technical report.

Tax benefits on a home construction loan.

Unlike regular housing loans where you can avail tax benefits on both interest and principal amount, you will get tax benefits only for the interest paid when you avail of a home construction loan, and only if the construction activity is not complete.

Knowing the terms of a home construction loan will help you avoid last-minute surprises and a cash crunch, to know more about home construction loans or to apply for one, visit (link)

Click here to learn more about your eligibility and apply for a home loan.


The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.

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