Home Construction Loan

Last Updated 15th Aug 2020

Construction Loan – Rate as on 15 Aug 2020

6th August 2020 – RBI keeps Repo Rate unchanged at 4%

Bank Interest Rate Processing Fee
SBI 6.95% 0.20% , Min Rs. 4,000, Max Rs. 17,400
HDFC 6.95% 0.50%, Min Rs. 3,000, Max Rs. 10,000
Citibank 7.75% NIL
Bank of Baroda 7.00% Min Rs. 7,500
ICICI Bank 6.95% 1.00%
Axis Bank 7.10% 0.20% , Min Rs. 5,000, Max Rs. 25,000
  • As per the current rates, Bank of India offers the lowest interest rate of 6.95% along with a processing fee of 0.25% minimum 1,500 and maximum 40,000 for a home construction loan.
  • Other top banks that offer loans at best rates for construction of a house are SBI, HDFC, Bank of Baroda, Citibank and LIC Housing Finance.
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About Home Construction Loan

A home construction loan is a loan taken against the mortgage of the property on which you plan to carry new construction or renovation. For instance, if you plan to expand your house area and build one more floor on your existing property; then you can finance the construction of the house by taking a home construction loan

Compare Top Banks providing Construction Loan

Bank Interest Rate Tenure Processing Fee
SBI Home Loan 6.95% 30 years 0.20% , Min Rs. 4,000, Max Rs. 17,400
HDFC Home Loan 6.95% 30 years 0.50%, Min Rs. 3,000, Max Rs. 10,000
Citibank Home Loan 7.75% 25 years NIL
Bank of Baroda 7.00% 30 years Min Rs. 7,500
ICICI Bank 6.95% 30 years 1.00%
Axis Bank 7.10% 30 years 0.20% , Min Rs. 5,000, Max Rs. 25,000
PNB Housing Finance 8.60% 30 years 0.50%, Min Rs. 10,000
LIC Housing Finance 6.90% 30 years 0.25%
Indiabulls 9.25% 25 years Min Rs. 7,500, Max Rs. 10,000
DBS Bank 7.70% 20 years Max Rs. 10,000
Aadhar Housing Finance 11.00% 30 years Min Rs. 3,500
Aavas Financiers 8.00% 30 years 1.00%
DHFL 9.50% 30 years 0.50%, Min Rs. 2,500, Max Rs. 20,000
Kotak Bank 8.60% 20 years Max Rs. 10,000
Jammu And Kashmir Bank 7.70% 15 years 0.25% , Min Rs. 500, Max Rs. 10,000
IDBI Bank 8.25% 30 years 0.50% , Min Rs. 2,500
Federal Bank 8.35% 30 years 0.50% , Min Rs. 3,000, Max Rs. 7,500
Dhan Laxmi Bank 8.85% 20 years 1.00% , Min Rs. 10,000
Corporation Bank 8.35% 30 years 0.50% , Max Rs. 50,000
Piramal Housing Finance 9.00% 30 years 0.10%
Bank of Maharashtra 8.20% 30 years 0.50%
Yes Bank 9.85% 25 years 1.00%, Max Rs. 15,000
Andhra Bank 8.15% 30 years 0.50% , Max Rs. 10,000
United Bank of India 8.00% 30 years 0.59% , Min Rs. 1,180, Max Rs. 11,800
Standard Chartered Bank 9.40% 20 years 1.00%, Min Rs. 5,000, Max Rs. 10,000
Syndicate Bank 8.00% 30 years 0.13% , Min Rs. 500, Max Rs. 5,000
PNB 7.15% 30 years 0.35% , Min Rs. 2,500, Max Rs. 15,000
RBL Bank 10.45% 25 years Min Rs. 5,000, Max Rs. 15,000
Karur Vysya Bank 8.20% 25 years Min Rs. 5,000
Indian Overseas Bank 7.45% 30 years 0.53% , Min Rs. 8,900, Max Rs. 13,350
HSBC Bank 8.65% 25 years 1.00% , Max Rs. 10,000
Edelweiss 10.50% 25 years 0.25%
DCB Bank 10.24% 20 years 2.00%, Min Rs. 5,000
Central Bank of India 7.25% 30 years 0.50% , Max Rs. 20,000
IDFC First Bank 9.50% 30 years Min Rs. 5,000, Max Rs. 5,000
Bank of India 6.85% 30 years 0.25% , Min Rs. 1,500, Max Rs. 20,000
IIFL 8.70% 30 years 1.25%
Allahabad Bank 8.25% 20 years 0.40% , Max Rs. 50,000
Union Bank of India 8.25% 30 years 0.50% , Max Rs. 15,000
South Indian Bank 8.05% 30 years 1.00% , Max Rs. 10,000
Punjab and Sind Bank 8.05% 30 years 0.25% , Min Rs. 1,000, Max Rs. 15,000
Lakshmi Vilas Bank 9.70% 20 years 0.40% , Min Rs. 10,000, Max Rs. 20,000
Karnataka Bank 8.55% 30 years 0.25% , Min Rs. 250
Indian Bank 7.55% 20 years 0.23% , Max Rs. 20,381
GIC Housing Finance 10.25% 20 years Min Rs. 2,500
Sundaram Home Finance 8.60% 20 years 0.50%
Bajaj Finserv 8.45% 20 years 0.50%
Canara Bank 8.05% 30 years 0.50% , Min Rs. 1,500, Max Rs. 10,000
Tata Capital 9.05% 30 years 0.50%
LT Housing Finance 9.90% 30 years 2.00%, Min Rs. 4,999
UCO Bank 6.90% 30 years 0.50% , Min Rs. 1,500, Max Rs. 15,000
Reliance Capital 10.00% 30 years 1.00%, Min Rs. 3,000, Max Rs. 6,500
OBC 8.00% 25 years 0.50% , Max Rs. 20,000

Here are some of the major banks which provide home construction loans in India:

  • State Bank of India: SBI Bank is one of the leading public sector banks in India for home loan. SBI also provides home construction loans at a low-interest rate of 6.85% for a tenure of 30 years. It does not charge any prepayment fees. SBI also provides an overdraft facility on home construction loan depending on your income eligibility and loan repayment capacity.
  • PNB Housing Finance: You can get a construction loan from PNB Housing finance at 8.60% for a tenure of 30 years. PNB Housing Finance charges a processing fee of 1.00% on a home building loan. The loan provided by PNB is available for both residents and non-resident Indians. Also, there are no charges or penalty on prepayment of home construction loans from PNB Housing Finance.
  • HDFC: An Indian resident and non-resident Indian above the age of 24 years can apply for a construction loan for a tenure upto 30 years from HDFC. Interest rates for HDFC home construction loans start at 6.95% and it charges a processing fee of 0.50%. HDFC offers a special discount on rates if the loan is taken by a female borrower solely or as a co-applicant.
  • ICICI Bank: You can get home construction loans from ICICI Bank at an interest rate starting 6.95% for a tenure of 30 years. In case of a floating rate of interest on home loans, there are nil prepayment charges. You can also get overdraft facility and top-up loans on a home construction loan with ICICI Bank.
  • Citibank: Citibank is one of the popular foreign banks for retail finance in India. You can get a low-interest rate of 7.90% for home construction loans from Citibank. You can also opt for an overdraft facility to save interest and balance transfer to get low rate loans. The processing fee charged by Citibank on a home construction loan is NIL.

House Building Loan - Features & Benefits

A home building loan has the following benefits for any borrower who wish to construct a house on his plot or an additional floor on his house:

  • Longer tenures: The house building loan is available for long tenures and can range between 5 to 30 years which means that the home loan EMI burden on the borrower is low and the loan is affordable.
  • Tax benefit: Like Home Loan, one can claim tax benefit on the principal amount and interest paid on the construction loans under Sec 80C and Sec 24B. Under the Sections, one can claim tax benefit up to Rs. 2 Lakhs on the interest and Rs. 1.5 Lakhs on the principal amount. The first time buyers can also claim additional tax benefit up to Rs. 50,000 under Sec 80 EE.
  • Balance transfer facility: Most of the banks also provide balance transfer facilities on home construction loans as they do on home loans. If a borrower finds that the current rate of interest he is paying on loan is higher than the market, he can opt to transfer the outstanding balance of loans to other banks by paying balance transfer processing fees of up to 1%.
    • Home Loan Balance Transfer
  • Home loan top up: You can also opt to take top-up loan as home construction loan on your existing home loan. Banks primarily check your past track record of repaying the home loan to check our eligibility to get additional loan for construction as top up on your running loan. Banks may also charge processing fees for providing home loan top-up in some cases.
    • Avail Top-Up Loans
  • Loan amount: The amount of loan amount you can get for the home construction loan depends on your income and repayment eligibility. You can get construction loans up to 90% of the value of the property. The loan amount can range between ₹100,000 to ₹150,000,000. To increase your eligibility of loan amount, you must add a co-applicant for the loan.

Construction Loan Eligibility Criteria

To avail the construction loan, you need to have a detailed construction plan about the house, including the materials to be used in the construction of the house. You can get a construction loan if you fulfill the following eligibility criteria:

  • Age: The age limit to get a home construction loan is between 18 years to 70 years. However, some banks give loans for construction upto a maximum age of 65 years.
  • Profession: Both self-employed and salaried individuals can avail a construction loan. The interest rates are lower for salaried applicants.
  • Credit Score: A credit score of 750 or above is considered an ideal score for availing a construction loan. However, some banks give home loans at a credit score of 650 and above.
  • Nationality: Any Indian resident or non-resident Indian can apply for home construction loans.
  • Income: The fixed income to obligation ratio cannot exceed 65% of the monthly income. The minimum income required to apply for a home construction loan is Rs. 25,000.
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House Construction Loan Documents

To get a home construction loan, you must get a pre-approval for the construction plan of property and submit the following documents:

  • Identity proof: Aadhaar Card, Valid Passport, Voter ID Card, Valid Driving License and PAN Card.
  • Address proof: Utility bills, Aadhaar Card, Valid Passport, Voter ID Card.
  • Income proof: Income Tax Returns, latest Form 16, Salary account statements for the last 6 months, Salary slips for the previous 3 months. In the case of self-employed individuals, the income tax returns, salary accounts of the previous 6 months and salary slips for the 3 months of the business entity also need to be submitted.
  • Documents related to property: Encumbrance property, title deeds of the property, plan sanctioned by local authorities and estimated construction cost quotation.

FAQs

How much loan can I get for home construction?

You can apply for a home construction loan upto a loan amount of 90% of property’s value. However, the loan amount for construction loan ranges upto Rs. 150,000,000. You can also add a co-applicant to increase your loan eligibility.

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What is required for a home construction loan?

To avail a home construction loan, you will need to submit the essential property documents such as encumbrance certificate, title deeds of the property, and estimated construction cost quotation so that the bank can evaluate that the property has a clean title and technical specifications. You also need to provide other documents for identity, address and income proof. Besides, having the essential documents you need to fulfill the basic eligibility criteria of the banks to grant a loan related to age, income and profession etc.

Where can I get a home construction loan?

Major Banks such as SBI, Axis Bank, PNB and Citibank provide home construction loans. You can decide about the best bank for a home construction loan based on the interest rates, processing fees, lending process and documents required for availing the loan.

Which bank is the best for construction loans?

HDFC can be considered as the best bank for construction loans as it provides loans at the lowest interest rate of 6.85%.

What are the current construction loan rates?

As on 15 Aug 2020, construction loan rates start from 6.85% rate of interest and range till 12.50% rate of interest.

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Home Loan News - Aug 2020
*Terms and conditions apply. Credit at sole discretion of lender subject to credit appraisal, eligibility check, rates, charges and terms. Information displayed is indicative and from collected from public sources. Read More
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