A home loan is the largest financial commitment most households ever make, and it is usually arranged in a hurry at the end of a property search rather than planned at the start. That order causes most of the problems.
This guide runs the other way round. It starts with what a lender will actually give you, works through what they will not fund, and ends with the sequencing issue that specifically affects anyone buying into a project that is not yet registered.
How Eligibility Is Assessed
Lenders assess two things: your capacity to repay and the security they are lending against.
Capacity is driven by net income, existing obligations and age. Most lenders work to a ceiling on what proportion of your monthly income can go to servicing all debt, which means an existing car loan or a large credit card balance reduces your home loan headroom directly. Age matters because the tenure typically has to end by retirement, so a longer tenure – and therefore a lower instalment – is available to younger borrowers.
Credit history is a threshold rather than a dial: a clean record gets you in the door, and a poor one is difficult to argue past regardless of income. Self-employed applicants are assessed on filed returns over several years, so the paperwork burden is heavier and the timeline longer.
The security side is about the property and the developer. Lenders maintain approved-project lists, and a home loan against a project they have not appraised takes considerably longer.
Clear or consolidate small existing loans before applying. Reducing monthly obligations raises your sanction more reliably than arguing about income.
Loan-to-Value: What Is Funded
Loan-to-value is the share of the property value the lender will fund. The regulatory ceilings are set by the Reserve Bank of India and step down as the home loan size rises, so a larger loan attracts a lower permitted percentage. Sector-level guidance is published by the National Housing Bank.
Two points are frequently misunderstood. First, the ceiling is a maximum, not an entitlement – individual lenders routinely lend below it based on their own assessment of you and the project. Second, the percentage applies to the property value as the lender assesses it, which may be lower than what you are paying, particularly if the agreement value sits above the lender’s valuation.
The balance is your down payment. Plan it from the assessed value rather than the price, and keep a margin, because a valuation coming in lower than expected turns directly into a larger cash requirement at short notice.
Ask the lender what value they will assess, not just what percentage they will lend. The percentage is meaningless until you know what it is a percentage of.
What the Loan Will Not Cover
This is where first-time buyers are most often caught short.
Stamp duty, registration fees and GST are generally excluded from the funded amount. So are most of the one-time charges: car parking, the clubhouse or amenity contribution, infrastructure and development charges, advance maintenance and the corpus or sinking fund.
Taken together, those items commonly add fifteen to twenty per cent to the base price. Since none of it is funded, your real cash requirement is the down payment plus all of that – and much of it falls due early, around agreement and registration, rather than being spread across construction.
The consequence is a timing mismatch that surprises people. On a construction-linked plan you may have drawn only a small share of the home loan when the full stamp duty and registration bill arrives. Model the cash flow month by month rather than assuming the home loan smooths it out.
Build a month-by-month cash plan covering down payment, stamp duty, registration, GST and one-time charges before you commit to a payment schedule.
| Item | Usually loan-funded? | When it falls due |
|---|---|---|
| Base price of the flat | Yes, up to the LTV ceiling | Across construction milestones |
| Down payment | No – this is your share | Early, at booking and agreement |
| Stamp duty | No | At registration |
| Registration fee | No | At registration |
| GST | No | With instalments, under construction |
| Car parking | Sometimes, within the LTV | Per the payment plan |
| Clubhouse / amenity charge | Rarely | Usually near possession |
| Advance maintenance and corpus | No | At possession |
General position across MMR lenders. Confirm each line with your own lender in writing, since policies differ.
Disbursement Against Milestones
Sanction and disbursement are different events, and conflating them causes real problems.
A sanction is the lender agreeing, in principle, to lend a stated amount subject to conditions. Disbursement is money actually moving, and on an under-construction property it is released in tranches against construction milestones certified by the lender’s engineer – not on demand and not on the developer’s schedule alone.
Until the home loan is fully disbursed, most lenders charge interest only on the amount drawn, sometimes described as pre-EMI. That keeps early outgoings lower, but it also means you are paying interest for a period without reducing principal. Some borrowers choose to start full instalments earlier to avoid that.
Where a project stalls, disbursement stops with it, but your obligation on what has already been drawn does not. That asymmetry is the single strongest argument for checking a developer’s delivery record before signing anything.
Read the delay clause in the agreement alongside your home loan terms. If construction halts, you keep servicing what has been drawn – understand that exposure first.
Choosing a Lender Properly
Compare on all-in cost, not the advertised rate. The headline number is a marketing figure; the cost that matters includes the processing fee, legal and valuation charges, any insurance being bundled, and the terms on prepayment and switching.
On a floating-rate loan, ask what external benchmark the rate is linked to and what spread sits over it, because the spread is what the lender controls. On a fixed rate, ask exactly how long the fixed period runs and what happens at the end of it.
Prepayment terms deserve attention. Most borrowers repay a home loan well before its stated tenure, so the ability to make partial prepayments without penalty is worth more over the life of the home loan than a small difference in the opening rate.
Get offers from at least three lenders. The differences between them on all-in cost are usually larger than buyers expect, and a written offer from one is useful leverage with another.
Ask each lender for a written sanction letter setting out rate, fees, tenure and prepayment terms. Verbal quotes are not comparable and do not survive contact with the paperwork.
Myths worth clearing up
A sanction means the money is guaranteed.
A sanction is agreement in principle, subject to conditions. Disbursement on an under-construction flat still depends on project approval and certified construction milestones.
The lowest advertised rate is the cheapest loan.
Not once processing fees, bundled insurance, the spread over the benchmark and prepayment terms are included. Compare all-in cost over your realistic holding period.
The loan will cover my stamp duty.
It usually will not. Stamp duty, registration and GST are ordinarily excluded, and they fall due early – before most of the home loan has been drawn.
The Pre-Launch Sequencing Problem
If you are looking at a project that has not yet been registered, there is a specific sequencing issue worth planning around.
Many lenders will not formally approve a project – adding it to their approved list – until it holds a valid registration. Without project approval, they may sanction against your profile but will not commit to the property, which means the home loan cannot complete when you need it to.
Meanwhile, under the Real Estate (Regulation and Development) Act, the project cannot lawfully be advertised, booked or sold before registration, and no more than ten per cent of the apartment cost may be taken before a registered agreement for sale exists. So the correct order is: registration, then agreement, then disbursement.
What you can usefully do in advance is get an in-principle assessment of your own eligibility, so that when the registration lands you are not starting the paperwork from zero while allocations move.
Get your eligibility assessed before launch, but do not expect a project-linked sanction until the registration exists. Plan the sequence, not just the amount.
