🏦 Finance & Loans
Home Loan vs Construction Loan — What is the Difference in India?
🤖 AI Answer by Biddaro⏱ 7 min read📅 Updated 1 November 2024
⚡ Quick Answer
Home loans are for buying ready or under-construction properties from builders. Construction loans (self-construction loans) are for building on your own plot — disbursed in stages as construction progresses.
Key Differences
| Feature | Home Loan | Construction Loan |
|---|---|---|
| Purpose | Buy built/under-construction property | Build on own plot |
| Disbursement | Single/lump sum to builder | Staged (as per construction progress) |
| Interest during construction | Pre-EMI interest only | Only on disbursed amount |
| Collateral | Property being purchased | Plot + construction |
| Max tenure | Up to 30 years | Up to 30 years |
| Interest rate (2024) | 8.5–9.5% p.a. | 8.75–10% p.a. |
| Tax benefit Section 24 | Up to ₹2L/year on interest | Up to ₹2L/year (from possession) |
Construction Loan Disbursement Stages
- Stage 1 (20%): Foundation and plinth
- Stage 2 (20%): Ground floor slab
- Stage 3 (20%): First floor slab/roof
- Stage 4 (20%): Brick work and plastering
- Stage 5 (20%): Final finishing and possession
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Important
Construction must be completed within 5 years of loan sanction for Section 24 tax benefits. Keep all construction bills — banks require completion certificate for final disbursement.
Related topics:
home loanconstruction loanfinancehousing loan india