Things to Know When Applying for House Construction Loans
by Arwind Sharma on April 28, 2017

For real estate consumers, there are a variety of housing loans available offered by banks and other financial houses. Housing loans are offered to applicants to buy a readymade house, under-construction house or planning to construct one. However, there are certain things that you should know about Home Construction Loans so that you can get the best deal on these loans. It is always beneficial to do proper research and do Housing Loan comparison on the rate of interest offered on home construction loan offered by different financial institution.

Find below some of the important things that you should be aware of before applying for housing loan:


Home Loan Eligibility and Required Papers

If you are someone who is thinking of taking a Home Construction Loan, make yourself eligible for the loan before applying. do all the paperwork related to this loan such as credit report, papers of the construction project, references, permanent address papers, employment papers, bank statement etc. When you have all the correct papers, you become eligible to get the best deal on Home Construction Loan.

Loan Sanction

Banks and other financial institution will do a final verification of the papers and details you have provided. When they find the details provided by you are correct after re-verification, the financial team will decide how much loan you can avail. So, it is advisable to apply for one after doing a rough estimate of the amount of money required for the construction of the house and your capability to return the money.

If you wish to build a house in the plot within a year of purchasing, it can be included as a component to get the loan. However, if you decide to build your house when the plot has been with you or your family for numerous years, you cannot add that into your loan as a component. So, take this into consideration.

Loan Disbursement

Once you loan gets approved, you won’t get the entire loan amount as lump sum. The disbursement of the loan amount is provided in instalments. Normally, it is done between two and five instalments. However, it depends mostly on the loan amount, loan ratio value along with the progress of the house construction. Be prepared to have around 15% of your construction budget with which you have to start construction of your house as you the first instalment is provided when the construction of your house starts. However, some financial institutions offer the loan amount as lump sum.

You need to pay pre-EMI on a monthly basis until the final amount of the loan is disbursed. You need to pay the rate of interest even you received the total loan amount. In case the construction of your house gets stopped in between, you need to pay the interest continuously to the concerned financial institution.

Low Tax Benefit


Home construction loans offer very low tax benefits when compared to a regular Home Loan. A regular Home Loan can get you avail tax benefits on both principal and interest. However, in case of a home construction loan, you get tax benefit on only on the interest you have paid when the construction of the house is not completed.

Home Loans have made it incredibly easy and simple to get the home that we want, at a reasonable cost. Just ensure that your credit history is clean and acceptable by the lender, and you shouldn’t have a problem getting your application approved.


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