LOAN FOR CONSTRUCTION A home loan or housing loan means a sum of money lend from a bank or financial institutions to buy or construct a house. The loan consists of variable or fixed interest rates and various payment terms. There are various types of home loans available in the market. In this article we are going to see home construction loan. Home Construction Loan This type of loan is borrowed by the people who already own a piece of land and wants to build their dream home. In this type of loan, the loan amount did not provide as a lump sum to the borrower. The loan amount for constructing a home is given as installments by various stages of the constructing building. Generally, the amount approved for this construction loan is as on approximate cost of that building. But it also varies bank to bank and all financial institutions. Some of the financial institution provide top-up loan and balance transfer facility along this home construction loan. Eligibility Criteria An individual resident Indian, who wants home construction loan must fulfill the following eligibility. These eligibility criteria may vary across various banks and financial institutions.
Particulars Salaried Self-Employed
Age 18 to 65 years 18 to 65 years
Employment Min.2 years of experience Min.5 years of experience
Credit Score 750 or above 750 or above
  Interest Rates Interest rates of home construction loan varies as per the risk score, eligibility and the type of customer. The rate of interest also varies from bank to bank and all financial institutions. Some of the interest rates of some leading home lending financial institutions are given below.
Financial Institution Interest Rates Processing Fee
SBI 6.95% onwards 0.35% onwards (Min Rs.2000 to Max Rs.10,000)
Canara Bank 6.9% onwards Up to 0.5% (Min Rs.1500 to Max 10,000)
HDFC Bank 7.35% onwards Up to 0.5% (Min Rs.3,000 for salaried) Up to 1.5% (Min Rs.4,500 for self-employed)
Bank of Baroda 6.85% onwards Up to 0.5 % of the loan amount
Federal Housing Loan 8.15% onwards Up to 0.5 % of the loan amount
  Documents Required The following documents are mandatory for availing the construction loan. The required documents are also varied across the financial institutions.
  • Identity Proof (Copy of Pan Card/Voter ID/Driving License/Passport)
  • Address Proof (Copy of Aadhar card/Driving License/Electricity Bill/Telephone Bill/Gas Bill)
  • Income Proof (Pay Slip for salaried employees for 6 months/ ITR for last 3 years, Balance Sheet & profit and loss account for last 3 years)
  • Bank account statement for all bank accounts held by applicant
  • Existing Loan document (if any)
Property Documents Required The following are the common and the basic documents required for the approval of the home construction loan across any financial institution.
  • Encumbrance Certificate
  • Title deeds of the plot
  • Estimate for construction assessed by civil engineer / an architect
  • Photocopy of plan sanctioned by local officials
  • Occupancy Certificate
  • Original of the land tax paid receipt and possession certificate as issued by the revenue authority.
  • Payment receipt or bank account statements containing advance payments made to buy the materials.

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