Structural Differences in Loan Disbursal
Financing a ready-to-move apartment differs significantly from financing an under-construction project from a developer.
Ready Property Loan: 100% Loan Sanctioned ──► Disbursed in Full to Seller ──► Full EMI Starts Immediately
Construction Loan: 100% Loan Sanctioned ──► Disbursed in Construction Tranches ──► Pre-EMI / Full EMI
Pre-EMI vs. Full EMI Explained
- Pre-EMI (Simple Interest): You pay interest only on the specific amount disbursed to the builder based on construction milestones. The principal repayment has not yet begun.
- Full EMI (Tranche-Based): You pay regular EMI (Principal + Interest) calculated on the cumulative disbursed amount. This helps reduce principal from day one and shortens the ultimate repayment schedule.
Comparison: Ready-to-Move vs. Under-Construction
| Evaluation Metric | Ready-to-Move Property | Under-Construction Property |
| GST Liability | 0% GST (with Completion Certificate) | 5% GST (Standard) / 1% (Affordable Housing) |
| Price Advantage | Higher base cost; no construction risk | 10% to 25% cheaper than ready inventory |
| Immediate Tax Benefit | Available starting in Year 1 | Tax deductions allowed only after possession |
| Rental Yield / Savings | Rent out immediately or save on tenancy rent | Dual burden: Ongoing rent + Pre-EMI payments |
| LTV Limit | 75% – 90% based on registered value | 75% – 90% based strictly on builder agreement stage |
The Income Tax Deduction Rules for Home Loans
Under the Old Tax Regime, home loan borrowers can claim tax deductions across two primary sections:
- Section 24(b) — Interest Deductions:
- Up to ₹2,00,000 per financial year on interest paid for a self-occupied property.
- Pre-Construction Interest Rule: Interest paid during the construction phase cannot be claimed while the property is being built. Instead, the total pre-construction interest is aggregated and claimed in 5 equal annual installments starting from the financial year in which possession is obtained.
- Section 80C — Principal Repayments:
- Up to ₹1,50,000 annually on principal repayment, stamp duty, and registration charges (shared within the standard 80C basket).
- The 5-Year Lock-in Rule: If you sell the property within 5 years of taking possession, all Section 80C deductions claimed previously are reversed and added back to your taxable income.
(Note: Under the New Tax Regime, Section 80C and Section 24(b) deductions for self-occupied properties are not available).