State Bank of India (SBI) is one of India's leading public sector banks, providing a wide range of home loan products. SBI follows a systematic disbursement process for under-construction properties to ensure that the loan amount is released to the borrower and builder in a structured manner. This procedure protects all parties' interests and ensures that construction proceeds smoothly. This guide will walk you through the SBI home loan disbursement process for under-construction property.
Stages of Loan Disbursement:
● Pre-approval: The borrower must complete the loan application and documentation requirements before beginning the disbursement process. The borrower's eligibility is determined by income, credit history, age, and employment stability. Upon approval, the borrower receives a pre-approval letter indicating the loan amount they are eligible for.
● Agreement with Builder: The borrower must agree with the builder after selecting an under-construction property. The agreement should include property details, a construction schedule, the total cost of the property, and payment terms. This agreement is necessary for SBI to process the home loan disbursement.
Disbursement Stages:
● Pre-disbursement: Before beginning the disbursement process, SBI thoroughly evaluates the property and verifies all legal and technical aspects. This step entails confirming the property's title, conducting a site visit, and evaluating the builder's credibility. The pre-disbursement formalities are completed once the bank is satisfied with the property's documentation and credentials.
● First Disbursement (Beginning of Construction): The first disbursement is made when the property's construction begins. This disbursement typically amounts to 20-25% of the total loan amount. Given the construction progress, the bank will release the funds in favour of the builder. The borrower must submit all required documents, including the builder's demand letter, before the first disbursement.
● Progress-Based Disbursements: Following the initial disbursement, SBI uses a progress-based disbursement model, with subsequent payouts made according to the stage of construction. Before releasing funds to the builder, the bank conducts a site visit and verifies the completion of the work at each stage. Completing the foundation, flooring, walls, roofing, and finishing work are common stages of disbursement.
● Borrower Contribution: In most cases, SBI will pay up to 80-90% of the property's value, leaving the borrower to fund the remainder. When the bank's disbursement reaches its maximum limit, the borrower's contribution is generally paid during the later stages of construction.
Compliance and Documentation:
● Builder's Demand Letter: At each disbursement stage, the builder must provide SBI with a demand letter stating the amount required for that stage of construction. The demand letter should accompany a completion certificate or engineer's certification indicating construction progress.
● No Objection Certificate (NOC): After each disbursement stage, the borrower must obtain a No Objection Certificate from the builder or relevant authorities. The NOC confirms that the borrower has no reservations about SBI's disbursement.
● Legal and Technical Verification: Throughout the disbursement process, SBI ensures that the property's legal and technical aspects comply with the bank's policies and the applicable laws and regulations. The bank may conduct periodic inspections to verify construction progress and assess potential risks.
Conclusion:
The SBI home loan disbursement process for under-construction properties is designed to ensure a smooth and secure loan disbursement while protecting the borrower's and the bank's interests. SBI ensures that funds are released in a controlled manner by following a structured disbursement model based on construction progress, reducing the risk of financial mismanagement. To ensure a smooth disbursement process, borrowers must provide all required documentation and comply with the bank's requirements. Regular communication with the bank and the builder is essential for keeping track of the construction progress and effectively coordinating disbursements. Borrowers can confidently finance their under-construction property projects with the support of one of India's most trusted banking institutions if they understand and follow the SBI home loan disbursement process.
