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Tata Capital > Blog > Loan for Home > Things You Need to Know before Applying for a Home Construction Loan

Loan for Home

Things You Need to Know before Applying for a Home Construction Loan

Things You Need to Know before Applying for a Home Construction Loan

Apart from the décor, what’s the one thing central to building your dream abode? Funds, of course! This is why housing finance backs your plans of constructing your dwelling with ease.

A home building loan can finance it all - from acquiring construction materials to labour costs to additional building expenses. However, the approval process for housing finance to construct a house from the ground up may differ from regular home loans.

Are you looking for finance to build your house? If so, then here’s all you need to know before applying for a home construction loan.

Loan disbursal

One of the critical distinctions between regular home loan and a house construction loan is the incremental disbursal of funds. For a pre-constructed property, a lender will likely disburse funds to the owner or developer in one go. But, for a property under construction, the approved loan amount is disbursed in various instalments. The lender releases it depending on house construction progress.

A house-building loan takes away the burden of handling a large loan amount as it allows you to avail funds precisely as per the construction requirements.

Additional Read: Home Construction Loan: Everything You Must Know

Specified construction plan

Construction loans are finalised and approved based on building plans and blueprints. Once they are agreed upon; the plans cannot change. Therefore, keep an accurate outline for your house ready before reaching out for finance.


Before approving home construction finance, a borrower needs to tend certain documents in addition to the regular income and KYC papers. You must provide your lender with plot documents, sales deeds, the layout of the proposed home, NOC from relevant authorities, approved plans, etc.

Short tenures

The loan tenure for home construction finance is typically shorter than a regular house loan. Before applying for home construction finance, you can calculate your monthly instalments in advance with home loan calculators readily available online.

Pre-EMI payment

Pre-EMI refers to payments that only include the interest component of your loan. Your lending institution might require you to start making pre-EMI payments on house construction loans until the actual loan amount is disbursed. Including or not including this clause will depend on your lender.

Eligibility criteria

Before applying for a loan for home construction, you must fulfil the required eligibility criteria. This generally includes a good credit score, job stability, work experience, etc. Additionally, if the plot or under-construction property is co-owned, there must be a co-applicant for the house-building loan.

In closing

Sure, constructing a house requires commitment; however, you can always rely on Tata Capital for easy eligibility on home construction finance. Put a full-stop to your financial worries and manage expenses smartly with our online home loan EMI calculator.

We offer attractive interest rates on our housing finance services. Fashion your dream home, connect with Tata Capital today!

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