If you’re planning to buy a house, one of the biggest decisions you’ll face is choosing between a ready-to-move-in property and an under-construction property. While aspects like location, price, and possession timeline matter, another crucial factor often overlooked is:
Which type gets better home loan terms?
This blog from RupeeQ explores the loan differences, benefits, risks, and tips to help you make the right financial decision—especially when it comes to interest rates, eligibility, disbursal, and documentation.
What Are Ready-to-Move and Under-Construction Properties?
- Ready-to-Move-in (RTM) Property: The house is complete and legally fit for immediate possession. You can shift in as soon as you register it.
- Under-Construction Property: The house or apartment is still being built and will be delivered in the future—typically within 2–5 years.
Loan Terms Compared: Ready vs Under-Construction
Here’s how loan terms differ between the two:
| Feature | Ready-to-Move Property | Under-Construction Property |
| Loan-to-Value (LTV) | Up to 90% | Up to 90% (but may reduce based on project stage) |
| Interest Rates | Usually lower if completed project is from reputed builder | May be higher or equal depending on construction risk |
| Loan Disbursal | Lump sum | In stages (linked to construction progress) |
| Pre-EMI Option | No | Yes (only interest paid until full disbursal) |
| Documentation | Straightforward | Extra checks like RERA registration, builder NOC |
| Risk Level | Low | Medium to High (delays, builder issues) |
| Tax Benefits | Full tax benefits from Year 1 | Limited until possession |
1. Loan Disbursal Process: Staged vs Lump Sum
For ready-to-move-in homes, banks disburse the entire loan amount in one go after all documents are verified. This is because the asset is complete and secure.
For under-construction properties, disbursal happens in phases, aligned with the builder’s construction milestones (foundation, walls, roof, etc.). This is called construction-linked disbursal.
RupeeQ Tip:
If you’re buying under construction, make sure your builder is RERA-approved. It protects you from excessive delays and fraud.
2. Interest Rates: Which Gets the Better Deal?
Banks do not usually discriminate on interest rates based solely on property type, but the risk profile of the project may affect the final offer.
- A completed home in a good locality with all approvals is considered low-risk → Better loan terms
- An under-construction home in early phases of work or by a non-reputed builder may be seen as higher risk → Slightly higher rate or more scrutiny
Example:
For a ₹50 lakh loan:
- RTM property at 8.50% = EMI ~ ₹43,391
- Under-construction at 8.75% = EMI ~ ₹44,164
This means a difference of ₹9,300 per year.
3. Loan-to-Value (LTV) Ratio: Is There a Difference?
In both cases, the RBI allows lenders to offer:
- Up to 90% LTV for loans below ₹30 lakhs
- Up to 80% for loans between ₹30–75 lakhs
- Up to 75% for loans above ₹75 lakhs
However, lenders may adopt a more conservative LTV for under-construction properties due to market risks, especially if the project is delayed or not RERA-compliant.
4. Pre-EMI vs Full EMI: What Should You Know?
For RTM:
- You start paying full EMI (interest + principal) immediately.
For Under-Construction:
- You can opt for Pre-EMI: You only pay the interest on the disbursed amount until the full loan is disbursed.
- Full EMI starts after possession.
Example: If ₹20 lakhs out of ₹50 lakhs is disbursed initially at 9%,
-
Pre-EMI = ₹15,000/month
-
Full EMI on ₹50 lakhs = ₹45,000/month
It eases short-term burden but increases overall interest outgo.
5. Tax Benefits: When Do They Start?
Ready-to-Move:
- Full tax benefits under Section 80C (₹1.5 lakh on principal) and 24(b) (₹2 lakh on interest) available from Day 1.
Under-Construction:
- Interest paid before possession qualifies for tax rebate only after possession, spread over 5 years in equal parts, subject to a ₹2 lakh cap.
RupeeQ Tip: If tax savings are a top priority, RTM may offer better benefits in the short term.
6. Property Risk and Delays
This is where ready-to-move properties win by a mile. You avoid:
- Construction delays
- Builder bankruptcy
- Incomplete amenities
- RERA violations
Under-construction properties, while potentially cheaper, carry risk unless you go with a reputed, RERA-registered developer.
7. Builder Tie-Ups and Special Loan Schemes
Some builders have tie-ups with banks and offer:
- Subvention plans (no EMI until possession)
- Lower interest schemes
- Processing fee waivers
But these are mostly available with under-construction projects, especially during new launches.
Always read the fine print—some of these offers hide delayed disbursal or higher rates later.
8. Documentation Differences
While basic documents (KYC, income proof, property papers) remain the same, under-construction properties require:
- RERA registration number
- Builder-buyer agreement
- Construction plan approval
- Stage-wise cost estimates
RupeeQ Tip:
Ask the builder for all bank-approved documents and check with RupeeQ for lenders who’ve already financed that project—it can fast-track your application.
Summary: Pros & Cons from Loan Perspective
Loan Disbursal
| Criteria | Ready-to-Move | Under-Construction |
| One-time | In stages | |
| EMI Starts | Immediately | After each stage / Pre-EMI option |
| Tax Benefits | Available immediately | After possession only |
| Property Risk | Very low | Moderate to high |
| Better Loan Terms? | Yes, generally | Depends on builder & project stage |
So, Which Is Better?
- Choose Ready-to-Move if you want quicker possession, tax benefits from year one, and peace of mind about loan disbursal.
- Choose Under-Construction if you’re looking for slightly lower initial prices and flexible payment plans—but only with reputed builders.
FAQs: Home Loan Terms for Ready vs Under-Construction Properties
Q1. Does a ready-to-move-in property always get lower interest rates?
Not always, but it often qualifies for smoother approval due to reduced risk.
Q2. Can I get full tax benefits on an under-construction property?
Only after possession. Pre-possession interest can be claimed post-possession in 5 equal installments.
Q3. Is the EMI structure different for both property types?
Yes. RTM homes start full EMI immediately, while under-construction homes often offer Pre-EMI options.
Q4. Do I need different documents for under-construction properties?
Yes. You’ll need RERA registration, construction plan approvals, and builder agreements in addition to standard home loan documents.
Q5. Which is safer from a loan approval perspective?
Ready-to-move homes typically face fewer hurdles due to the absence of construction risk
