When you buy a house, you apply for a home loan, but when you have to build a house on your land, then a home construction loan is taken. However a home construction loan is different from a home loan in many ways. There is a lot of difference in all things, from its interest to documentation. Let's know about this.

When you buy a built house, then you can apply for a home loan. According to the information given on the HDFC Bank website, you can take up to 80% of the price of your house as a home loan. Meanwhile, the bank approves your loan by considering that house as collateral. However, in the meantime, other factors like income, CIBIL score etc. are also seen.

Home construction loan is usually chosen when you want to build a residential house for personal use. Through home construction loan, you can take a loan of up to 100 percent of the construction cost which can be up to 90 percent of the total market value of the land on which you want to build a house. Usually, this construction loan is a part of the home loan. In this, land and ongoing construction are accepted as collateral.

There is also a difference in the interest rates of home loan and home construction loan. The interest rates of home construction loan are higher than that of home loan.

According to HDFC Bank, both home loan and home construction loan can be taken for a maximum of 30 years. At the same time, according to the information given on the website of PNB Housing, home loan can be available for a maximum of 30 years, but the tenure of home construction loan is shorter. This is available for 1 year to 3 years. After the house is built, the construction loan can be converted into a regular home loan.

After home loan approval, the approved amount is transferred to the bank account in lump sum, but in home construction loan, the amount is transferred in installments based on the progress of your construction.

In a home loan, you usually need KYC documents, property papers, income proof, etc., while in a home construction loan, apart from the documents required for a home loan, approval from the Municipal Corporation and construction blueprint authorized by the Architect are also required.