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All You Need to Know About Home Loans for Under Construction Properties

Nov 11, 2022
All You Need to Know About Home Loans for Under Construction Properties

Owning a home in India is a great sign of progress and personal growth. With the ownership of a house comes the responsibility and pride of having an asset in your possession. A property under your name is a title worth investing in. That’s why, in India, the purchase, construction, and renovation of a housing property is seen as a major step towards achieving the next level of success in life. Home loans in India have become an important aspect of an individual’s financial planning for home or under-construction purchases.

The best kinds of homes are those constructed from zero since they carry an element of personal choice. Many individuals opt for a home loan for under-construction property in case funding is required after the building has begun its establishment. Let’s read more about this kind of loan.

Features and Benefits of Home Loans For Under-Construction Properties

Many financial institutions will lend a home loan on an under-construction property to help you complete your midway-constructed house.

Here are a few important features of such a loan:

  • The interest rates on such loans depend upon the borrower’s loan amount, credit score, and debt-to-income ratio.
  • The loaning amount is not given in a lump sum. Instead, it is given over a significant amount of time depending on the various stages of construction.
  • For all the time before you finally earn the possession of the property, you only need to pay the interest aspect of the loan, termed as the prior period interest.
  • The loan tenure will be decided according to the current stage and rate of construction.

Top 5 Benefits of a loan on under-construction property:

  • It offers a flexible tenure of up to 30 years.
  • You can take advantage of the EMI system for repayment through electronic clearing systems (ECS).
  • You can be eligible for tax benefits of up to INR 2 lakh under Section 24 of the Income Tax Act.
  • Home loan disbursement process for under-construction property starts within 72 hours upon approval.
  • Loan amount can touch even 90% of the cost of the construction project.

The most important benefit is that your dream home is only one financing option away from being completely constructed as a residence!

Tips for Home Loan For Under-Construction Property

Taking up a home loan for an under-construction property is a crucial decision to make. Before you decide on a loan on an under-construction property, take a look at these tips to make the most of this commitment:

  • Thoroughly research on the masons, construction workers, carpenters, painters, plumbers, and welders that are working on your property. The more skilled they are, the faster your construction will be completed, and hence, the less you will be charged overall.
  • While choosing the land for property construction, ensure that you choose real estate that will see appreciation in the future. Post construction of property, the valuation of that asset will increase multifold for further sale or rent.
  • Read more about the tax benefits that you are entitled to under the following two Sections of the Income Tax Act of 1961:
  • Section 24B, which states that you can avail tax deduction if you are paying an interest for a home loan for under-construction property.
  • Section 80C, which calls for deductions of up to INR 1.5 lakh annually from your taxable income if you have invested in a property by taking up a home loan.

When Home Loan EMI Starts for Under-Construction Property

For a loan on an under-construction property, the EMI system that operates is called the Pre-EMI. When you apply for this loan, qualify for eligibility, submit your documents online, and get your home loan application approved, not all of the principal amount is sent to your account. The financial lending institution will send fractions of the total amount as and when the construction proceeds.

Here, the only payment that the borrower has to make is an only-interest one on the loan sanctioned. Only upon completion of the entire project will the entirety of the sum be transferred to the individual’s account.

It is after this point that the actual EMI functions will begin rolling and you will have to pay installments. For a home loan under construction property, you can opt to repay your loan amount through ECS or post-dated cheques.


A home loan for an under-construction property is a smart decision to make if you wish to see your dream house being built in a quick, trouble-free, and secure manner. It makes the management of various expenditures easy to manage and track. If you are interested in knowing more about home loans, you can check out Grihashakti’s home construction loan.

You can read about the documentation required and loan eligibility criteria. To know if you qualify for a home loan, you can utilize our online eligibility calculator. Take your first step towards building your dream house today.

Disclaimer: *Please note that this article is for your knowledge only. Loans are disbursed at the sole discretion of SMFG Grihashakti. Final approval, loan terms, disbursal process, foreclosure charges and foreclosure process will be subject to SMFG Grihashakti’s policy at the time of loan application. If you wish to know more about our products and services, please contact us.

SMFG India Home Finance Co. Ltd. (Formerly Fullerton India Home Finance Co. Ltd.)
CIN number: U65922TN2010PLC076972

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