Buying a Plot or Resale Flat With an HFC Loan: The 3 Year Rule and LTV Caps

A Bengaluru buyer has found a 1,200 square foot site on the city's edge for Rs 50 lakh and plans to build in a few years, once savings recover. A housing finance company is willing to look at a loan. Then the paperwork arrives: a declaration that a house will be built on the plot within three years of taking the loan. The buyer had been thinking of five.

That three year clause is written into RBI's current definition of housing finance for HFCs. The same Directions cap how much an HFC can lend against a property's value, keep stamp duty out of the cost it finances, and set checks for resale flats and unapproved layouts. This guide explains those rules for a Bengaluru buyer of a plot or a ready flat. It is buyer guidance on lending rules, not advice on whether to buy a plot.

The short answer. RBI's Housing Finance Companies Directions, 2025, updated as on October 1, 2026, include plot loans in housing finance only where the borrower declares a house will be built within three years of availing the loan. They cap LTV at 90 percent for loans up to Rs 30 lakh, 80 percent above Rs 30 lakh up to Rs 75 lakh, and 75 percent above Rs 75 lakh, with stamp duty and registration excluded from cost unless the house costs Rs 10 lakh or less. Resale buyers declare plan compliance and the HFC's architect certifies it before disbursal; unregularised unauthorised colonies do not qualify. The trade-off: a three year build deadline suits buyers ready to construct soon, but it can be a poor fit for someone who wants to hold a plot for longer.

What does the three year rule for plots say?

It is part of the definition. The Directions define housing finance as financing for purchase, construction, reconstruction, renovation or repairs of residential dwelling units, and list what it includes. One item is loans to individuals for purchase of plots for construction of residential dwelling units, provided a declaration is obtained from the borrower that he intends to construct a house on the plot within a period of three years from the date of availing of the loan.

That is a sharper timeline than the bank rule. RBI's April 1, 2025 Master Circular on Housing Finance for banks asks for a declaration to build within such period as may be laid down by the banks themselves, leaving the period to each bank. With an HFC, the Directions fix it at three years from availing the loan. Our earlier comparison of plot loans and home loans in Bengaluru covers the wider differences between the two products.

What does the three year deadline mean for your plans?

It turns a plot purchase into a building project with a start date. The definition clause ties the declaration to three years from the date of availing the loan, so the clock starts when the money is drawn, not when you finally decide to build. In that window you would typically need a sanctioned plan, a contractor and the funds to build, whether from savings or a separate construction loan.

The definition itself does not spell out what happens if the house is not built within three years. That consequence, if any, will sit in your HFC's loan agreement and policy, so ask the HFC to show you the relevant clause before you sign the declaration. If your honest plan is to hold the plot for longer, say so, and ask whether a different product suits you better. Signing a declaration you do not expect to keep is the riskiest option of all.

If you do intend to build soon, use the three years well. Get the building plan sanctioned in your name early, because paragraph 179 makes a sanctioned plan in the applicant's name a precondition for an HFC construction loan on an owned plot.

How much can an HFC lend on your property?

It depends on the loan size. Paragraph 58 of the Directions says no HFC shall grant housing loans to individuals up to Rs 30 lakh with an LTV ratio exceeding 90 percent, above Rs 30 lakh and up to Rs 75 lakh with LTV exceeding 80 percent, and above Rs 75 lakh with LTV exceeding 75 percent. LTV is computed with the total outstanding, including principal, accrued interest and other charges, against the realisable value of the property mortgaged to the HFC.

The table applies those caps to illustrative Bengaluru prices, assuming the HFC lends the maximum. An actual sanction can be lower because it also depends on your income and the HFC's valuation. For a sense of monthly cost, a Rs 40 lakh loan over 20 years at 8.51 percent, the September 2026 average rate on fresh rupee loans that RBI reported across all sectors in its October 30, 2026 release, works out to about Rs 34,738 a month; your own rate will depend on the HFC and your profile.

Why is stamp duty not part of the loan?

Because the Directions exclude it from cost. The same paragraph says the HFC shall not include stamp duty, registration and other documentation charges in the cost of the housing property it finances, so the effectiveness of LTV norms is not diluted. To encourage affordable housing for borrowers such as economically weaker sections and low income groups, an HFC may add these charges to the cost where the house or dwelling unit does not exceed Rs 10 lakh.

For most Bengaluru purchases, that means stamp duty and registration come entirely from savings, on top of the minimum contribution in the table. Our breakdown of Karnataka stamp duty and registration with worked budgets shows how large that extra cash can be.

What checks apply to a resale flat or an older house?

The same plan checks banks use. Paragraph 180 of the Directions says that where an applicant seeks a loan to buy a built up house or flat, it should be mandatory for the applicant to declare by an effective affidavit-cum-undertaking that it has been constructed as per the sanctioned plan and/or building bye-laws and, as far as possible, has a completion certificate. An architect appointed by the HFC must certify before disbursement that the property is strictly as per the sanctioned plan and/or building bye-laws.

Paragraph 181 says no loan shall be given for properties in unauthorised colonies unless and until they have been regularised and development and other charges paid. Paragraph 182 says no loan shall be given for properties meant for residential use that the applicant intends to use for commercial purposes and declares so while applying.

What if you plan to build on a plot you already own?

Paragraph 179 sets three conditions. The HFC must obtain a copy of the sanctioned plan in the applicant's name before sanctioning the loan. The applicant must give an affidavit-cum-undertaking not to violate the plan, to build strictly as per it, and to obtain the completion certificate within 3 months of completion, failing which the HFC may recall the entire loan with interest and costs. And an HFC appointed architect must certify at various stages that construction follows the plan, and later that the completion certificate has been obtained.

A seven-point checklist for Bengaluru plot and resale buyers using an HFC

1. For a plot, decide honestly whether you can start building within three years of the loan.
2. Place your purchase in the right LTV band: up to Rs 30 lakh, Rs 30 lakh to Rs 75 lakh, or above Rs 75 lakh.
3. Watch the Rs 75 lakh line, where the cap drops from 80 to 75 percent.
4. Budget stamp duty and registration from savings for any property above Rs 10 lakh.
5. For a resale flat, collect the sanctioned plan and any completion document before signing.
6. Check whether the layout was ever unauthorised, and get regularisation papers if so.
7. State residential use plainly on the application if you plan to live in the property.

Frequently asked questions

How long do I have to build if an HFC funds my plot?

RBI's Housing Finance Companies Directions, 2025 define housing finance to include loans to individuals for purchase of plots for construction of residential dwelling units, provided a declaration is obtained from the borrower that a house will be constructed on the plot within three years from the date of availing the loan.

What are the LTV limits for HFC home loans?

The Directions say no HFC shall grant housing loans to individuals up to Rs 30 lakh with LTV above 90 percent, above Rs 30 lakh and up to Rs 75 lakh with LTV above 80 percent, and above Rs 75 lakh with LTV above 75 percent. Stamp duty and registration are excluded from the property cost.

Can an HFC lend on a resale flat that lacks a completion certificate?

The Directions say a buyer of a built up house or flat must declare by affidavit-cum-undertaking that it was constructed as per the sanctioned plan and/or building bye-laws and, as far as possible, has a completion certificate. An HFC appointed architect must also certify plan compliance before disbursement.

Will an HFC lend on a property in an unapproved layout?

The Directions say no loan shall be given for properties in the category of unauthorised colonies unless and until they have been regularised and development and other charges paid. Ask for regularisation papers before you pay any advance on such a property.

Last updated 2026-11-03. PropNewz Team.