Home Construction Loan

Home Construction Loan Interest Rates

Lenders usually provide home building loans at floating interest rates. The housing construction loan interest rates offered to loan applicants depend on factors like their credit score, monthly income, occupation profile, employer’s profile and loan amount and are usually the same as the regular home loan interest rates.

Compare Interest Rates of Home Construction Loan

Name of Lender	Loans of Up to Rs. 30 Lakh
Bank of India	7.10% p.a. onwards	Check Eligibility
State Bank of India	7.25% p.a. onwards	Check Eligibility
Punjab National Bank	7.20% p.a. onwards	Check Eligibility
Canara Bank	7.15% p.a. onwards	Check Eligibility
HDFC Bank	7.90% p.a. onwards	Check Eligibility
Bajaj Housing Finance	7.40% p.a. onwards	Check Eligibility
ICICI Bank	7.65% p.a. onwards	Check Eligibility
Axis Bank	*8.25% p.a. onwards	Check Eligibility
Federal Bank	*7.90% p.a. onwards	Check Eligibility
Kotak Mahindra Bank	7.70% p.a. onwards	Check Eligibility
IDFC FIRST Bank	8.85% p.a. onwards	Check Eligibility
IDBI Bank	7.35% p.a. onwards	Check Eligibility
RBL Bank	8.20% p.a. onwards	Check Eligibility
Tata Capital Housing Finance	7.75% p.a. onwards	Check Eligibility
PNB Housing Finance	*7.20% p.a. onwards	Check Eligibility
Sammaan Capital (Formerly known as Indiabulls Housing Finance)	8.75% p.a. onwards	Check Eligibility
India Shelter Home Loan	8.43% p.a. onwards	Check Eligibility
L&T Finance Limited	*8.40% p.a. onwards	Check Eligibility
Godrej Housing Finance	7.75% p.a. onwards	Check Eligibility
Home First Finance	8.00% p.a. onwards	Check Eligibility
Easy Home Finance	8.99% p.a. onwards	Check Eligibility
Piramal Capital Housing Finance	*8.25% p.a. onwards	Check Eligibility
Shubham Housing Finance	10.45% p.a. onwards	Check Eligibility
Punjab & Sind Bank	7.30% p.a. onwards	Check Eligibility
Jio Housing Finance	8.20% p.a. onwards	Check Eligibility
HDFC Sales Pvt Ltd	7.90% p.a. onwards	Check Eligibility

Note: Interest rates as of 8 July 2025

Documents Required for Home Construction Loan

The documentation process is largely similar to the documents required for regular home loans. The main documents required to apply for a housing construction loan are as follows:

• Identity proof
• Address proof
• Age proof
• Income proof
• Proof of employment/business
• Property related documents
• Estimated cost quotation for home construction
• Duly filled application form

Note:  Lenders may ask their home construction loan applicants to submit additional documents.

Eligibility for Home Construction Loan

The eligibility criteria is more or less similar to the regular home loan eligibility. Some of the key points about the home construction loan eligibility criteria are as follows:

• Lenders usually offer housing construction loans to both Resident and Non-Resident Indians (NRIs).
• Age: Banks and HFCs typically approve house-building loan applications from borrowers aged 18 and up. Most banks and HFCs require home construction loan borrowers to repay their loans by the age of 70.
  
• Both self-employed and salaried individuals are eligible for availing home building loan.
• Borrowers of home-building loans can add earning family members as co-borrower(s) or opt for a longer loan tenure to improve their eligibility for home construction loans.
• Credit Score: Loan applicants with credit scores of 700 or higher are more likely to qualify for housing construction loans. However, some banks and HFCs may offer home loans with lower interest rates to applicants with higher credit scores.

Lenders might also look at factors like a loan applicant’s income, work experience (for salaried applicants) or business continuity (for business owners), employer’s profile, occupation profile, etc. while ascertaining their eligibility for availing a home construction loan.

Features of Home Construction Loan

Loan-to-Value Ratio

The LTV ratio of housing construction loans is the total proportion of a property’s value that a lender can finance through the loan. The LTV ratio should not exceed the regulatory caps on home loan LTV ratios decided by the RBI. The breakup of loan amounts for home construction loans and their corresponding LTV ratios are mentioned below:

Loan Amount	LTV Ratio
Up to Rs. 30 Lakhs	Up to 90% of the estimated cost of construction
Above Rs. 30 Lakhs to Rs. 75 Lakhs	Up to 80% of the estimated cost of construction
Above Rs. 75 Lakhs	Up to 75% of the estimated cost of construction

Besides, every lender decides the final LTV ratio of loan applicants based on factors including their credit profile,  repayment capacity, etc. Note that some lenders may offer lower interest rates to loan applicants willing to increase their down payment contribution and thus opt for lower LTV ratios.

Loan Tenure

Banks and HFCs usually offer housing construction loans to applicants for loan tenures of up to 30 years. Lenders usually look at a loan applicant’s repayment capacity when finalising their loan tenure.

• They usually require loan applicants to limit their total EMI contribution, including the EMI of their proposed home construction loan, to be within 50-60% of their net monthly income.
• Thus, one should use the home loan EMI calculator to calculate the loan EMI based on various loan amounts, tenures & interest rates before making the loan application.
• This would help one to opt for a loan tenure that keeps his total EMIs, including that of the proposed housing construction loan to within 50% of their net income.

Availability of Balance Transfer Facility

Existing housing construction loan borrowers can exercise the home loan balance transfer facility to move their existing construction loan to another lender at lower interest rates. This facility allows existing loan borrowers to cut down their overall interest costs. Note that the new lender will conduct an exhaustive credit risk assessment of a loan applicant before approving their request for a balance transfer.

Processing Fees

Most lenders levy processing charges on applicants for home construction loans. It usually goes up to 2% of the total loan amount, with few lenders levying a higher charge on borrowers of a home building loan. Lenders may also waive off the processing fees on a partial or complete basis for loan applicants availing a home building loan.

Prepayment Charges

RBI guidelines prevent banks and HFCs from charging prepayment fees for housing construction loans availed at floating interest rates. However, lenders have the discretion to either levy or waive off the prepayment fees on fixed-rate home construction loans.

FAQs on Home Construction Loans

What is the processing fee for a home construction loan?

Lenders offering home construction loans usually levy a processing fee and or login/admin fee during the loan processing stage. They usually charge up to 2% of the loan amount as a processing fee, with some home loan lenders charging higher fees to their construction loan borrowers.

Can I get a home construction loan on a commercial property?

Lenders offer home construction loans only for building a residential property on an existing plot of land earmarked for residential purposes. The possibility of getting a home construction loan on commercial or other non-residential property will depend on the land use regulations of the state/local government.

Is it necessary to submit a construction plan to obtain a house construction loan?

Some lenders, who offer home building facilities either through their regular home loan or through a separate home building loan, may ask their borrowers to submit a home building plan.

How to get a Home Construction Loan?

Prospective applicants can avail home building loans by visiting the lender’s website or their branch to apply for their home loan or house construction loan scheme. They can also visit online financial marketplaces like Paisabazaar to check and compare home loans or house construction loan offers from multiple lenders before applying for a loan.

When does the home loan EMI start for an under-construction property?

In the case of a home loan taken for an under-construction property, the lender disburses the loan amount to the builder in installments based on the completion of the stages of construction by the builder. The home loan EMI is calculated based on the disbursed loan amount.

However, some lenders offer a pre-EMI option to their home loan borrowers, wherein they have to service the interest component till the construction of the house is complete, while the regular EMI includes both the principal and interest components after the completion of the construction of the house property.

Which bank is best for home construction loans?

Most consumers would prefer availing home construction loans, either under the regular home loan facility or as a separate scheme, from a lender offering the lowest interest rates as it would help them save on their overall interest costs. However, besides considering the home building loan interest rates, prospective applicants should also consider the loan amount, loan tenure, LTV ratio, processing fees and time taken for loan approval/disbursal while searching for the best bank offering home construction loans.

How much can I borrow for home construction?

Some banks/HFCs use the multiplier method to determine the eligibility of their home-building loan applicants, wherein the lender calculates the eligible home loan amount based on a predetermined multiplier of the loan applicant’s net monthly income. Lenders usually provide loan amounts up to 72 times the loan applicant’s gross monthly income or 6 times the gross annual income (for self-employed applicants).

Other lenders use the EMI/NMI ratio, wherein the applicant’s total EMI obligations should be within a predetermined ratio, usually 50-55% of his income. Some lenders also use a combination of these two methods to figure out the eligible loan amount for an applicant.

What is the minimum credit score required for housing construction loans?

The minimum credit score requirement to avail a home building loan, whether under their regular home loan product or as an independent scheme, depends on the lender’s eligibility criteria. However, loan applicants with a credit score of at least 700 are usually more likely to get a home building loan approval.

What is the interest rate of SBI Home Construction Loan?

SBI does not offer a separate home loan scheme for home construction. Borrowers planning to avail home construction loan from the SBI can avail the regular SBI Home Loan scheme at interest rates starting from 8.40% p.a.

What is the difference between a regular home loan and a housing construction loan?

Lenders offer regular home loans to individuals looking to raise funds to buy a home, construct a home, or renovate/extend a home. However, some lenders also offer home construction loan schemes solely to construct homes on existing plots owned by loan applicants.