A home loan is sanctioned once, but for a home that is still being built it is usually paid out in stages. Most delays are not about whether the bank will lend — they are about a document that is missing at the moment a payment falls due. Having the paperwork ready, in the order the bank will ask for it, removes most of them.
Every lender has its own list, and the details change from bank to bank, so treat this as a guide and confirm the specifics with yours.
Before you apply: how much will the bank lend?
A bank lends a share of the home's value, not all of it. The Reserve Bank of India sets the upper limit, known as the loan-to-value ratio:
- up to 90 per cent of the value for loans up to ₹30 lakh;
- up to 80 per cent for loans above ₹30 lakh and up to ₹75 lakh;
- up to 75 per cent for loans above ₹75 lakh.
The rest is your own contribution, and on an under-construction home the bank will usually expect you to have paid it — or your share of each stage — before it releases its own money.
Two other numbers shape the offer: your income, which sets how large an EMI the bank thinks you can carry alongside any other loans, and your credit score, which affects both whether you are approved and the rate you are offered. Check your credit report before you apply; correcting an old error takes weeks, not days.
Your own documents
These are what the bank uses to decide how much it will lend you:
- Identity and address — your PAN card and an address proof such as Aadhaar.
- Income, if you are salaried — recent salary slips, Form 16, and several months of statements for the account your salary is paid into.
- Income, if you are self-employed — income-tax returns for the last few years with their computations, your business's financial statements, and proof that the business exists and is running.
- Existing loans — statements for any loans you are already repaying.
- Photographs and the application form, signed by every applicant.
If a co-applicant — usually a spouse or parent — is adding their income, they will need the same set. Buyers living abroad will also need their passport, visa or work permit and overseas income documents; our NRI Corner covers the rest.
The property documents
These are what the bank uses to decide whether it will lend against the home:
- the allotment letter and the agreement for sale for your apartment;
- the project's RERA registration and its approved plans — the same documents you can check on the ORERA portal yourself;
- a no-objection letter from the builder, confirming the flat can be mortgaged to the bank, or a tripartite agreement between you, the builder and the bank;
- the builder's title documents for the land, where the bank has not already reviewed the project.
Many banks review a project in advance — its title, approvals and the builder's record — which makes the property side of your application much quicker. It is worth asking which lenders have already done so for the project you are considering.
What the bank does next
Once your application is in, the bank runs two checks on the property: a legal check on the title and approvals, and a technical check, in which its own valuer inspects the site and confirms the value. Its offer is based on that valuation, not only on the price in your agreement.
Sanction, then disbursement
Sanction is the bank's promise to lend a certain amount on certain terms, usually valid for a few months. Disbursement is the money actually being paid.
For a ready home, the two happen close together. For a home under construction, the bank usually pays the builder in instalments as each stage is completed — the foundation, each slab, the finishing — following the payment plan in your agreement. Some banks also ask for a certificate from the project's architect or engineer confirming the stage reached.
While construction is under way you may pay pre-EMI interest — interest only on the amount disbursed so far — with the full EMI starting after the final instalment. Some banks let you start the full EMI immediately instead, which shortens the loan. Ask which options your bank offers.
The three documents that hold things up
At each stage of an under-construction purchase, the same three documents cause most of the delays:
- The builder's demand letter for that stage. The bank pays against it, so it has to match the stage the building has actually reached — and your name, flat number and agreement details exactly as the bank has them.
- Proof of your own contribution. Banks lend a share of the price, not all of it, and they want receipts showing you have paid your part before they release theirs.
- The builder's no-objection letter or tripartite agreement, where the bank requires one. Getting it signed at the start saves a week at the first disbursement.
Keep a single folder
Keep a folder — paper or digital — with a copy of every receipt, every demand letter and every bank letter, in date order. When the bank asks for something, you will have it in a minute, not a week. The same folder will help when you file your taxes: the interest and principal you repay may reduce your tax, depending on the tax regime you choose, and a tax adviser will want to see them.
Before you sign the loan agreement
- Read the rate clause. Know whether the rate is fixed or floating, what it is linked to, and how often it can change.
- Ask about prepayment. For floating-rate home loans to individuals, banks do not charge for paying early; check what applies to yours.
- Check what is optional. If insurance or other products are offered with the loan, ask which of them you are free to decline.
If you would like help with the sequence for a particular bank, or the builder's documents your bank will need, speak to our team. And if you are still comparing homes, our guide to carpet, built-up and super built-up area explains how to read the price you are borrowing against.
