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About Loan for Construction

Owning a dream house remains a dream for many simply because of budget constraints. Personal loans are insufficient to fund the purchase or construction of a house. Construction loans offer an easy alternative in such situations.

Loans for construction are available at low interest rates and easy instalments. Loans are available for both purchase as well as construction of homes. They may also be taken for major repairs, purchase of land, and certain other home-related needs.

Loans for construction are offered by different banking and non-banking institutions. Below are listed some of the top institutions offering construction loans.

Loan For Construction
Loan For Construction

HDFC Bank Home Loans

HDFC Bank offers various financial products for both individuals as well as organizations. Loans for construction are offered to both individuals – either jointly or singly – or to builders for construction of home. HDFC Bank loans for construction loans can be categorized as regular and telescopic loans. The maximum tenure under each category is as under –

  • Telescopic Loans – 30 years
  • Regular Loans – 20 years

Building projects are funded depending upon the amount of loan requested and the value of the project. The general limits are as under –

Amount of Loan Percentage of Project Cost Available
20 Lakh90%
30 – 75 Lakh80%
Above 75 Lakh75%

HDFC Bank offers two types of interest rates on construction loans – the floating or adjustable rate and the fixed rate. Applicants may choose the type of interest they would like to pay.

The floating or adjustable rate is linked to the Retail Prime Lending Rate (RPLR). The interest – and therefore the EMI – payable would change with every change in RPLR.

Under the Fixed rate option – called the Trufixed home loan rate – the rate of interest would remain fixed for a certain initial period after which the floating rate would apply automatically.

Repayment of loan is completed in Equated Monthly Instalments (EMI) and there are various options available. An option chosen at the time of application remains constant throughout the term of the loan. The following are the options available –

  • Accelerated Repayment :
  • The repayment of the loan is accelerated – hastened – and the loan is repaid within a short term. This option attracts higher EMI since the amount + interest repaid with each instalment is higher.

  • Telescopic Repayment :
  • Under this option, the payment is extended over a long period with smaller EMIs to relieve the burden on the borrower.

  • Set Up Repayment Facility (SURF) :
  • Under this option, the amount of EMI is linked with the amount of pay hike you expect to receive. The EMI in the initial years is low. The amount rises as you grow in your career and enhance your income.

  • Flexible Loan Instalment Facility (FLIP) :
  • This option is the converse of the SURF option. The amount of EMI is heavy during the initial years and decreases as the loan term progresses. It is ideal for those nearing retirement and expecting their income to diminish in the latter years of the term.

HDFC Bank’s loan for construction loan attracts a processing fee of 1.25% of the amount sanctioned subject to a minimum of Rs.3000.

Aditya Birla Capital Home Finance

Aditya Birla Capital offers loans to both real estate developers as well as individuals for construction of homes. The terms under the loan are –

CriteriaIndividuals Developers
Maximum Amount of Loan (percentage of value of property)

Up to 30 Lakhs – 90%

30-75 Lakhs – 80%

>75Lakhs – 75%

100 crore
Maximum Tenure30 years60 years

The property will be mortgaged to the bank for the duration of the loan.

Eligibility criteria vary from applicant to applicant depending on whether the applicant is an individual – salaried or self-employed – a sole proprietor, partnership, LLC, or other type of organization.

For more details, please visit the lender website.

Bajaj Finserv Home Loans

Bajaj Finserv offers applicants loan to construct homes on land they own. Loan may also be availed for purchase of property under construction.

Bajaj Finserv Home Loan offers flexibility of loan amount. When an applicant applies for loan, the entire sanctioned amount will be available. However, interest will be charged only on the amount actually utilized. This allows individuals the security of having the amount available as well as relief from heavy interests and EMI.

Bajaj Finserv also offers various value added features such as 72 hour disbursals, quick approvals, and low interest rates.

Bajaj Finserv Home Construction Loan attracts a processing fee of 0.9% and a penalty of Rs. 1000 for EMI default including bounced checks.

The information provided here is not exhaustive and is subject to change by the concerned organization at any time. Please visit the respective websites for detailed and up to date information.

FAQs of Loan for Construction

1. What are the eligibility criteria for age for availing of construction loans?

The applicant should be a minimum of 18 years of age and a maximum of 65 years of age.

2. What are the property-related documents required for availing of home construction loans?

The following documents are required –

1. Title deeds of the plot

2. An estimate for the construction, tested and assessed by a civil engineer/architect

3. A xerox copy of the final plan passed by local authorities

4. Encumbrance certificate

3. What is the credit score needed to apply for a construction loan?

A credit score of 750 given by a reputed credit bureau is sufficient to apply for a construction loan.

4. What is not a part of construction loans?

Anything other than construction like electrical work, plumbing, light fittings, etc. is not a part of the construction loan.

5. What factors do lenders look at before disbursing the loan?

Lenders look at the age, income, any other loans, ability to pay loans in the future, etc. before approving the loan.

6. What is the processing fee charged by lenders on construction loans?

The processing fee usually goes up to 2% of the loan amount. Some lenders may charge a higher fee.

7. Are there any prepayment charges for home construction loans?

Lenders have the discretion to charge for the prepayment fee but it should be specifically mentioned at the time of approving the loan.

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