Construction-Linked Disbursement
For an under-construction property, the Reserve Bank of India requires banks to link disbursal of an individual housing loan closely to the stages of construction, and does not permit upfront disbursal on incomplete or under-construction projects.[1]Separately, RERA bars a promoter from taking more than ten percent of the cost as an advance before a written, registered agreement for sale.[2]Neither source fixes a standard split between stages, so project teams should read the stage schedule from the actual sanction letters rather than assume a typical curve. Teams that align their milestone billing to the lender's stages keep the buyer's cash burden flat instead of forcing a balloon payment at a later stage.
Margin Money and the Lender's Risk Window
Banks fund only a portion of the property value, called the loan-to-value (LTV) ratio, and the buyer brings the rest as margin money. RBI caps LTV at 90 percent for individual housing loans up to Rs 30 lakh, 80 percent above Rs 30 lakh up to Rs 75 lakh, and 75 percent above Rs 75 lakh, so the minimum margin is 10, 20 or 25 percent depending on the loan size.[3]A lender may set its own margin above that minimum, especially where the collateral is still being built. When a builder offers subvention or pre-EMI schemes, the economic effect is the builder financing the buyer's pre-possession interest, and the cost of that finance is not always visible in the headline price.
Reconciling Lender Stages with Project Cash Flow
A frequent cause of mid-project cash stress is a misalignment between the lender's disbursement stages and the project's actual cost curve. A project whose cost-weighted midpoint falls on the superstructure slab will feel a squeeze if the lender's second tranche is keyed to a later milestone, because construction must continue while receivables are still building. The mitigation is to publish a disbursement-aligned cash flow that maps each lender stage to the matching schedule of values line, and to negotiate with the lender for milestone restatement when the project plan moves. Without that map, the project borrows short and pays twice for the privilege.
Sources
- Master Circular - Housing Finance (RBI/2015-16/46, 1 July 2015) — Reserve Bank of India
- What it says:
- Disbursal of housing loans to individuals should be closely linked to the stages of construction; upfront disbursal is not permitted for incomplete or under-construction projects (projects sponsored by government or statutory authorities are the stated exception).
- Rights:
- Reserve Bank of India publication; cited and paraphrased, not reproduced
- Retrieved:
- 2026-09-23
- Real Estate (Regulation and Development) Act, 2016, section 13(1) — Indian Kanoon (statute text)
- What it says:
- A promoter may not accept more than ten per cent of the cost of the apartment, plot or building as an advance or application fee before a written, registered agreement for sale.
- Rights:
- Act of Parliament; section cited and paraphrased, text not reproduced
- Retrieved:
- 2026-09-23
- Individual Housing Loans: Rationalisation of Risk-Weights and Loan to Value (LTV) Ratios (RBI/2016-17/317, DBR.BP.BC.No.72/08.12.015/2016-17, 7 June 2017) — Reserve Bank of India
- What it says:
- Maximum loan-to-value ratio for individual housing loans: 90% for loans up to Rs 30 lakh, 80% above Rs 30 lakh up to Rs 75 lakh, 75% above Rs 75 lakh.
- Rights:
- Reserve Bank of India publication; cited and paraphrased, not reproduced
- Retrieved:
- 2026-09-23