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Compared to a ready-to-move-in property, an under-construction property requires a few additional checks before you apply for a home loan. Since the project is still being built, buyers need to review both the property’s status and their financial readiness before moving ahead.
This post lists the key checks you should make before you apply for home loan for an under-construction property.
Verify the Project and Builder on the RERA Portal
On the RERA portal, you can check project details such as approvals, construction timelines, sanctioned plans, fund utilisation disclosures, and many other important updates. Some state RERA portals also provide information about the builder’s past projects, allowing you to see whether they completed projects on time. You can also read complaints filed against the builder or the project and check how they were resolved. These details can help you assess both the project and the builder before applying for a home loan.
Verify the Encumbrance Certificate (EC)
An Encumbrance Certificate (EC) helps you check whether the property has any registered financial or legal liabilities, such as an existing mortgage or other registered claims, during the specified period. For a property purchase, it is generally advisable to look for a Nil EC, which indicates that no encumbrances are recorded for the period covered by the certificate.
Confirm the Property Has All Required Legal Approvals
Verify the land title, approved building plans, commencement certificate, and approvals from the relevant local authorities. If the project is close to completion, check whether the Occupancy Certificate has been issued or when it is expected. Missing approvals can delay both the construction process and your home loan application.
Check Whether Your Preferred Lender Has Approved the Project
Lenders may have a list of approved projects that have already undergone their legal and technical checks. If the property you plan to buy has been approved by the lender you want to finance through, the home loan process may become simpler and quicker. Your loan approval will still depend on your eligibility and the lender’s assessment.
Understand the Construction-Linked Payment Schedule
Unlike a ready-to-move-in home, payments for an under-construction property are usually made in stages. Your home loan is also generally disbursed based on construction milestones such as excavation, foundation and completion of each floor, or the agreed payment plan. This can help you manage your finances better, prepare for possible construction delays, and plan for home loan tax benefits.
Estimate the Total Cost of Ownership
The property price is only one part of the total expense. Calculate other costs such as the booking amount, down payment, stamp duty, registration charges, GST (if applicable), parking charges, maintenance deposits, and interior expenses. Having a clear estimate of the overall cost can help you decide the loan amount you need and reduce the chances of a funding gap later.
Evaluate Your Home Loan Eligibility
Checking your eligibility lets you know the loan amount a bank may be willing to finance. Based on that, you can
- Plan to save more for the down payment to reduce the amount you need to borrow
- Improve your credit score
- Consider a more suitable property within your budget
Use an EMI calculator for home loan to compare how different loan amounts, down payments, interest rates, and loan tenures affect your monthly EMI and the total interest payable.
Understand Pre-EMI and Full EMI
For an under-construction property, you may have the option to pay either Pre-EMI or Full EMI. Pre-EMI usually covers only the interest on the amount disbursed, while Full EMI includes both the principal and interest. Comparing both options can help you decide whether to prioritise a lower overall interest outgo or align your repayment strategy with your home loan tax planning.
Read the Builder-Buyer Agreement Carefully
Before signing, read the builder-buyer agreement carefully. Pay attention to the payment schedule, possession timeline, cancellation terms, delay compensation, and any additional charges mentioned in the agreement. Reading these terms in advance helps you know your rights and responsibilities as a buyer, so you know what you can claim and how to respond if any issue arises during the home-buying process.
Plan for Tax Implications
Most home loan tax benefits become available after you take possession of the property. Knowing this in advance can help you plan your finances, especially if you want to make the most of the available tax benefits.
Final Thoughts
An under-construction property also gives you the opportunity to create a home that reflects your preferences. Watching it take shape from the ground up can make the experience even more rewarding. The financing process should support that experience, not become a hurdle.
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