How to Get a Home Loan to Construct Your Own Home | Kotak Mahindra Bank - Home Loan Stories
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30 NOVEMBER, 2021

Gone are the days when people had to save for decades to build their dream home. Now, with easy availability of loans, you can construct your dream house without waiting for your savings to accumulate.

With home construction loans, you can construct your dream home and pay the cost over many years through flexible tenures. Moreover, you can choose the amount you wish to pay towards the loan as per your financial viability.

Here is a brief guide on a home construction loan.

What is a home construction loan?

A home construction loan is an amount of money that you can borrow from any bank or financial institution to arrange funds to construct a residential house on a vacant plot of land. Once you get the approval for the loan amount, you can repay the loan in equal installments called equated monthly installments over a flexible tenure.

Features of home construction loan

  • Tenure

You can avail a home construction loan for a maximum tenure of 15 years. It is best to choose a tenure that helps you get a comfortable EMI. You can use an EMI calculator to determine your EMI, basis the loan amount, chosen tenure and the interest rates available.

  • Interest rates

The interest rates of home construction loans are higher than that of home loans. It ranges from 6.9%-8%, depending on your loan amount and other eligibility.

  • Disbursement

The system of loan disbursal for a home construction loan is slightly different from that of home loans. Usually, lenders do not disburse the entire loan amount at once. Depending on your loan size, loan to value ratio, and progress of construction, the lender releases the loan amount in 2-5 installments. The lender could also monitor construction progress to ensure that it is being carried out as per the floor plan you have submitted. If you choose to make any changes in the approved plan without adequate approvals, they can choose to freeze the loan disbursal.


To avail a home construction loan, you would need to furnish the following documents:

  • Identity proof and address proof
  • Income Tax Returns
  • No Encumbrance Certificate
  • Plan and layout for the proposed house approved by the municipality
  • Estimate of cost of construction
  • Sales and title deed
  • Proof of money contributed for the house
  • Money receipt by sub-registrar
  • Copy of authority letter addressed to the sub-registrar, acknowledged


The eligibility of a home construction loan is based on your nationality, age, income, credit score, and employment status. Every lender has different eligibility criteria, and so you must use an eligibility calculator before you apply to ensure that you comply with it.

Process to get a home construction loan

  • Visit the lender’s bank and click on the ‘apply now’ on the home loan construction loan tab.
  • Fill the application form with your personal and professional details.
  • Submit the form.
  • The bank representative will contact you and give you a quote.

A home construction loan can help you witness your dream house turn into reality without a glitch. However, you must ensure to borrow an amount that you can comfortably repay. Use a home loan EMI calculator before you apply for the loan.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.