A project is complete or nearly complete, but a share of the flats is still unsold — and the money tied up in them is money you need for finishing works, the next project or day-to-day costs. Inventory funding is designed for exactly this situation.
What inventory funding is — and isn't
Inventory funding is a loan to a developer against unsold units in a completed or near-complete project, repaid from the sale proceeds as those units are sold. It is a market term rather than a regulatory category: RBI does not define "inventory funding", but for banks a loan against existing real estate that is repaid from sale proceeds is treated as commercial real estate.
Housing finance companies publish products along these lines. Bajaj Housing Finance, for example, describes its Inventory Funding Scheme as being for residential and commercial projects that are completed or nearing completion, to help developers meet working capital needs and costs at the last leg of the project.
Inventory funding vs construction finance vs LRD
| Compared on | Construction finance | Inventory funding | Lease rental discounting |
|---|---|---|---|
| Stage | While the project is being built | Completed or near-complete project | Completed, leased property |
| Drawn | In stages, against certified progress | Usually against the unsold stock | Against future rent |
| Repaid from | Sales collections over the project | Sale of the unsold units | Rent paid by tenants |
| Main risk lenders watch | Execution and cost overruns | Sales velocity and pricing | Tenant quality and lease term |
Who lends
- Housing finance companies and NBFCs — the most active lenders, with published developer-finance and inventory products.
- Banks — some lend against project receivables, within RBI's commercial real estate rules.
- Private credit funds (AIFs) — for larger or more structured deals.
Terms, pricing and appetite vary widely between lenders.
How it is structured
- Security. Typically a mortgage of the unsold units and hypothecation of the project's sales receivables.
- Escrow and sweep. Sale proceeds are routed through an escrow arrangement, with an agreed share of each collection used to pay down the loan.
- Unit release. When a unit is sold, the lender issues an NOC releasing it once the agreed paydown is made. RBI requires banks that finance housing projects to stipulate that builders state in their brochures that the mortgagee bank's NOC will be provided for the sale of flats where required.
The exact release mechanism and paydown per unit are set out in each lender's sanction letter.
What lenders assess
- Execution track record — a history of completing projects on time.
- Sales and cash-flow velocity — how quickly the remaining units are likely to sell, and at what prices.
- End use of funds — what the money will be used for.
- Title, approvals and RERA status of the project, and whether the units being offered as security are genuinely unsold.
RERA points to keep in mind
Under RERA, a developer cannot mortgage a unit after it has been sold under an agreement for sale, so only genuinely unsold stock can be offered as security. In Maharashtra, MahaRERA's account rules also keep 70% of buyer payments in a lien-free account — see our guide to the MahaRERA 70% account.
Market context: unsold stock in MMR and Pune
According to ANAROCK's Q2 2026 residential report, the top seven cities held about 6.17 lakh unsold homes. The MMR accounted for about 1.92 lakh units — roughly 31% of the total and about 18 months of sales — while Pune held about 83,800 units, around 16 months of sales. With that much stock on the market, many developers are looking for ways to unlock capital tied up in finished inventory.
Stalled projects: the SWAMIH Fund
For projects that have stalled for lack of funds, the government-backed SWAMIH Investment Fund provides last-mile priority debt. According to the government's March 2026 backgrounder, the fund — managed by SBICAP Ventures — supports RERA-registered, net-worth-positive projects with homes of up to 200 sq m carpet area, priced below ₹2 crore in the MMR (lower caps apply in other cities), and had helped complete over 58,000 homes by December 2025. A second fund, SWAMIH-2, was announced in the 2025-26 Budget.
Risks and costs for developers
- Higher cost than construction finance in many cases, reflecting the structure and risk.
- Sales dependence — slow sales or price cuts stretch repayment.
- Paydown on every sale — part of each sale goes to the lender, reducing free cash flow.
- Covenants — escrow, release and reporting conditions must be met.
A note on dealer and distributor inventory funding
"Inventory funding" also describes something quite different: working capital for dealers and distributors to hold stock. This is usually a cash credit or similar limit secured on stock and receivables, where the amount you can draw — your drawing power — is based on a current stock statement, typically no older than three months under RBI's norms. Banks such as HDFC Bank run dealer-finance programmes linked to manufacturers. If this is the funding you need, see our inventory funding service.
How Biz Corp Solutions helps
We help developers assess whether inventory funding fits their situation, prepare the sales and cash-flow information lenders expect, and approach suitable HFCs, NBFCs, banks and funds. Explore our construction finance and inventory funding services.
Market figures are from the sources listed below as of their publication dates. Lender products and terms change — check current terms with each lender.