For most buyers the loan decides the budget, not the other way round. Understanding how lenders view an under-construction purchase saves both money and surprises.
This is general information, not financial advice. Terms vary by lender and by borrower profile, and approval is always at the lender's discretion.
Project approval comes first
Banks maintain approved project lists — commonly called APF approval. If a project is already approved by a lender, your loan process is faster and the legal risk has been independently reviewed. Ask which banks have approved the project, and treat approval by several major lenders as a mild positive signal about the documentation.
How much you can borrow
| Factor | Typical effect |
|---|---|
| Loan-to-value | Lenders fund a percentage of property value; the rest is your down payment |
| FOIR / income ratio | Total EMIs capped as a share of net monthly income |
| Existing obligations | Car loans and card balances reduce eligibility directly |
| Credit score | Affects both approval and the rate offered |
| Age and tenure | Longer tenure raises eligibility but increases total interest |
Note that LTV applies to property value as assessed by the bank, not to the all-inclusive cost. Stamp duty, registration, GST and interiors are generally not funded, so plan for those separately.
Disbursement on under-construction property
The loan releases in stages linked to construction progress, not in one payment. Two consequences:
- You pay interest only on the amount disbursed so far — this is the pre-EMI stage
- Full EMI begins once the loan is fully disbursed
Some buyers opt to pay full EMI from the start to reduce total interest. Whether that suits you depends on cashflow, especially if you are also paying rent during construction.
Terms worth negotiating
- Interest rate — always ask for the best rate for your score band, and compare at least three lenders
- Processing fee — frequently waived or reduced
- Prepayment terms — floating-rate home loans to individuals generally carry no prepayment penalty
- Insurance bundling — often optional despite how it is presented
Subvention schemes: read carefully
In a subvention arrangement the developer services interest for a period. The loan is still in your name and your credit record is on the line. If the developer stops paying, the default is yours. Understand exactly who owes what, and by when, before signing.
Tax treatment
Deductions on home loan principal and interest are available under the Income Tax Act, with different rules for self-occupied and let-out property, and specific treatment of pre-construction interest. Rules change between budgets and regimes — confirm the current position with a chartered accountant for your situation.
Need loan help?
We can tell you which lenders have approved the project and connect you with them. Approval and terms remain entirely at the lender's discretion.
Frequently asked questions
Can I get a home loan for an under-construction flat?
Yes. The loan is disbursed in stages linked to construction progress, and you pay interest only on the amount disbursed until full disbursement.
Does a home loan cover stamp duty and GST?
Generally no. Lenders fund a percentage of the assessed property value; stamp duty, registration, GST and interiors are usually paid separately.