Whether you approach a bank, an NBFC or a housing finance company, construction finance is assessed in a broadly similar way: the lender is backing a specific project and wants to be confident it will be built, sold and repaid. Knowing what they look for — and the RBI rules behind it — helps you prepare a file that moves quickly.
The short answer
Lenders typically assess six things:
- The promoter — track record, financial strength and where the equity comes from.
- Title and approvals — clear land title, building permissions and RERA registration.
- Cost and funding plan — total project cost and how it will be met, including promoter contribution.
- Sales and cash flow — bookings, collections and whether receivables can cover pending cost and debt.
- Security — mortgage of the project and hypothecation of receivables.
- Compliance — RBI rules for the lender and RERA rules for the project.
The promoter and track record
Lenders look at your history of completed projects, delivery timelines, existing debt and group finances. RBI's 2025 Directions also require banks to check the source of promoter equity and to ensure that borrowings by a parent company are not passed into the project company as equity.
Title, approvals and RERA
- Clear title. The lender's legal team will verify the land title and chain of documents. Housing finance companies are specifically required to verify title documents and certificates directly with the issuers.
- Approvals before disbursement. Under RBI's Directions, a loan can be sanctioned in the normal course, but disbursement must wait until the borrower has obtained the required clearances from government and statutory authorities. The same rule applies to NBFCs and HFCs.
- Local terminology. In Greater Mumbai, building approval runs through an IOD and then a Commencement Certificate from the municipal corporation. Across most of the rest of Maharashtra — including Thane-district towns — building permission is granted under the state's unified development control regulations.
- RERA registration. A project cannot be advertised, marketed, booked or sold without RERA registration, and registration itself requires approvals and a commencement certificate. Some lenders fund only RERA-registered projects.
Project cost, funding plan and promoter contribution
Lenders want a realistic cost estimate and a clear means of finance: how much comes from the promoter, from customer advances and from debt. For residential projects classified as commercial real estate – residential housing (CRE-RH), RBI allows lenders to count contingent sales receivables as part of the promoter's contribution.
Where a loan falls under RBI's project-finance framework, there are further requirements before the first disbursement — including financial closure (binding arrangements for most of the project cost), a documented expected completion date (for real estate, the expected occupancy certificate date) and a stage-wise disbursement schedule in the loan agreement.
Sales, receivables and cash-flow cover
Real estate loans are repaid largely from sales, so lenders study:
- Sales velocity — how fast units are selling, and how much stock is unsold.
- Committed receivables — money still due from buyers of sold units.
- Cash-flow cover — whether committed receivables (and the value of unsold stock) can cover the cost still to be incurred plus the debt outstanding.
There is no single regulator-set ratio; each lender applies its own thresholds.
Security, escrow and the MahaRERA account rules
Construction lenders typically take a mortgage of the project and hypothecation of its receivables, with repayment through an escrow mechanism. In Maharashtra, though, MahaRERA's Order 56/2024 requires buyer payments to flow into a collection account and a 70% separate account that must be free of any lien or escrow. Lenders therefore have to structure repayment around the 30% transaction account and properly withdrawn funds. Under RERA, a unit also cannot be mortgaged after it has been sold under an agreement for sale. Read more in our guide to the MahaRERA 70% account.
How disbursement works
- Stage-wise release. Funds are released in proportion to construction progress and to the promoter's equity infusion.
- Lender's engineer. Under RBI's project-finance framework, the lender's independent engineer or architect certifies the stage of completion before each tranche.
- Moratorium and repayment. Many construction loans have a principal moratorium during construction, with repayment from sales collections afterwards.
- Delays. RBI's rules allow the expected completion date of a real estate project to be deferred within limits — up to two years for non-infrastructure projects, subject to conditions and extra provisioning — without the loan being downgraded.
RBI rules every developer should know
- No bank funding for land purchase. RBI's Directions state that a bank shall not extend fund-based or non-fund-based facilities to private builders for acquisition of land, even as part of a housing project. Banks lend to private builders through loans linked to each specific project. RBI kept this restriction when it allowed bank lending to REITs in February 2026.
- Name the bank in your marketing. Banks financing a housing project must require the builder to disclose the mortgagee bank's name in brochures and advertisements, and to state that the bank's NOC will be provided for the sale of flats where required. Funds are not released until this is done.
- CRE and CRE-RH. Loans to builders for property meant for sale or lease are classified as commercial real estate. Residential projects (with commercial space of no more than 10% of FSI) qualify as CRE-RH, which carries a lower risk weight for banks — 75% instead of 100%.
Bank or NBFC: what changes
The bank restriction on land funding does not apply in the same way to NBFCs and HFCs that are not part of a bank group, so early-stage needs are often met by them. Banks generally offer lower costs but apply stricter norms. Read our comparison of banks, NBFCs and financial institutions.
A pre-application checklist
- Land title documents and title search report
- Approved plans and commencement certificate (or IOD and CC in Mumbai)
- RERA registration, or a clear timeline for it
- Project report with cost, means of finance, sales plan and cash flows
- Promoter and company financials, and details of completed and ongoing projects
- Sales and collection data for ongoing projects
- Details of existing borrowings and security
How Biz Corp Solutions helps
We arrange construction finance of ₹5 crore to ₹500 crore for builders and developers. We help assemble a lender-ready file, structure the funding around RERA's account rules and approach the banks, NBFCs and financial institutions that fit your project — keeping you updated at every stage.
This guide reflects RBI's 2025 Directions and MahaRERA orders as of October 2026. Lender policies vary and rules are updated from time to time.