Home loan sanction letter: the steps from pre-approval to disbursement

3.13.1 What are the home loan steps for a new flat, from pre-approval to disbursement?

A home loan for a new flat moves through five steps: pre-approval, sanction, the Key Facts Statement (KFS), the loan agreement and disbursement. Each step gives you one document to read and keep. A pre-approval is an estimate based on your income and credit. The sanction letter is the lender’s written approval of a loan amount on stated terms. The KFS is the standard summary that the Reserve Bank of India (RBI) makes a bank give you before you sign. The loan agreement is the contract. Disbursement is the release of money, which for an under-construction flat comes in stages. RBI’s Fair Practices Code covers this flow for commercial banks. It is section A, “Fair Practices Code for Lenders”, of the RBI (Commercial Banks - Responsible Business Conduct) Directions, 2025. Sachi did not check the matching rules for housing finance companies for this guide. If your lender is one, ask it for its fair practices code.

1. Get a pre-approval or an eligibility figure before you book. The home loan eligibility guide explains how lenders size the loan.
2. Book the flat, sign the agreement for sale, and apply for the loan with the property documents.
3. Get the sanction letter, and read every condition in it.
4. Get the KFS, compare it with the sanction letter, and accept within its validity period.
5. Sign the loan agreement, and for an under-construction flat, the tripartite agreement if the bank uses one.
6. Ask for each disbursement when the builder raises a stage demand.

Step	Document you get	What it fixes
Pre-approval	In-principle approval	An estimate of the loan, before you pick a flat
Sanction	Sanction letter	Loan amount, tenure, rate, repayment mode, conditions
KFS	Key Facts Statement	Rate, fees, annual percentage rate (APR), disbursal schedule
Loan agreement	Signed contract, with the KFS as a summary box	All terms of the loan
Disbursement	Payment to the builder, stage by stage	When your loan, and your interest, starts to grow

3.13.2 What is a pre-approved home loan, and how long is it valid?

A pre-approved home loan is an in-principle approval that a lender gives before you choose a flat. HDFC Bank’s home loan page describes it as “an in-principal approval for a loan given on the basis of your income, creditworthiness and financial position”. The same page says pre-approved loans are “generally” taken before property selection. It also says they are valid for 6 months from the date of sanction. That period is HDFC Bank’s statement for its own loans. Other lenders can set a different period, so ask your lender in writing. A pre-approval does not approve the flat. The lender still checks the property before the final sanction. Bank of Baroda’s home loan checklist lists the property papers it asks for. They include the agreement for sale, the approved plan and the builder’s receipts. It also lists a title clearance report from an approved advocate and a valuation report from the bank’s approved valuer. So use the pre-approval to set your budget, and not as proof that the loan is certain.

Question	Pre-approval	Sanction
When	Before you choose a flat, or soon after	After you apply with the flat’s documents
Based on	Income, credit and finances	Your documents and the lender’s check of the flat
Validity at HDFC Bank	Generally 6 months from the date of sanction	Sachi did not find a stated period on a bank’s page
Does it bind the lender?	It is an in-principle approval	The lender then gives the KFS with binding terms

The amount in the final sanction can differ from the pre-approval. HDFC Bank’s page says that the approved amount can differ from the amount you applied for.

3.13.3 What does a home loan sanction letter contain?

A home loan sanction letter states the loan the lender approves and the terms of that approval. HDFC Bank’s page lists what it details: “the loan amount, tenure, applicable interest rate, repayment mode and other special conditions”. RBI rules add some items that the letter must carry. Paragraph 356 of the RBI Responsible Business Conduct Directions, 2025 covers your original property documents. A sanction letter issued on or after 1 December 2023 must state when and where the bank will return them after you repay. Paragraph 349(4) makes the bank disclose, in the sanction letter, all charges to switch from a floating to a fixed rate. Paragraph 353(8) makes it state whether pre-payment charges apply. The home loan interest rates guide covers those charges. Paragraph 333 says the bank must convey the credit limit and its terms to you. It must also keep your acceptance of those terms on record. So read the special conditions before you sign the acceptance copy.

Item in the sanction letter	Why you check it	Source
Loan amount and tenure	It can differ from the amount you applied for	HDFC Bank home loan page
Interest rate and repayment mode	It sets your EMI or pre-EMI	HDFC Bank home loan page
Special conditions	Documents or steps you must finish before disbursement	HDFC Bank home loan page
Pre-payment and switching charges	Both must be disclosed. An undisclosed pre-payment charge cannot be levied	RBI paragraphs 349(4) and 353(8)
Return of original property documents	Timeline and place of return after you repay	RBI paragraph 356

If the bank rejects your application, paragraph 331 says it must give you the main reasons in writing. Paragraph 327 says the bank must disclose the fees for processing, and the amount refundable if the loan is not sanctioned or disbursed. Ask for that refund rule before you pay a processing fee.

3.13.4 What must you check in the Key Facts Statement and loan agreement before you sign?

Check that the Key Facts Statement (KFS) matches the sanction letter, and that the loan agreement matches the KFS. Paragraph 348 of the RBI Responsible Business Conduct Directions, 2025 covers new retail term loans sanctioned on or after 1 October 2024. The bank must give a KFS for each one. Sachi reads a home loan to an individual as one of these. The KFS uses the standard format in Annex XIII. It must be in a language you understand, and the bank must explain it to you. Each KFS carries a unique proposal number. For a loan of seven days or more, it stays valid for at least three working days. If you agree within that period, the bank is bound by the KFS terms. Under paragraph 348(5), the bank cannot charge a fee that the KFS does not list, unless you give explicit consent. Paragraph 348(6) makes the KFS a summary box in the loan agreement. The interest rates guide explains the rate and APR lines, so this guide covers the other lines.

Compare these lines in the KFS with your sanction letter and your agreement for sale:

1. Sanctioned loan amount: it matches the sanction letter.
2. Disbursal schedule: the KFS says whether the loan is released in stages or 100 percent upfront. For stages, it names the clause in the loan agreement.
3. Fees and charges: each fee in the KFS matches the sanction letter, with no extra lines.
4. Annual percentage rate and repayment schedule: these show the full yearly cost.
5. Your acknowledgement: the bank must explain the KFS and get your acknowledgement that you understood it. Sign only after that.

Document	What it is	RBI rule
KFS	Standard summary of the loan, valid at least three working days	Paragraph 348(1) and 348(2)
Fees not in the KFS	Cannot be charged without your explicit consent	Paragraph 348(5)
Loan agreement	Contract with the KFS as a summary box	Paragraph 348(6)
Copy of the loan agreement	The bank must give you a copy, with every enclosure, at sanction or disbursement	Paragraph 334

For a new flat bought under a builder-linked scheme, you can also sign a tripartite agreement with the bank and the builder. Read it together with the loan agreement before you sign either.

3.13.5 How does the bank disburse a loan for an under-construction flat?

For an under-construction flat, the bank releases the loan to the builder in stages, linked to construction. Paragraph 116 of the RBI (Commercial Banks - Credit Facilities) Directions, 2025 sets this rule for housing loans to individuals. Disbursal “shall be closely linked to the stages of construction”. Upfront disbursal “shall not be made” for incomplete, under-construction or green field housing projects. Paragraph 117 makes one exception, for projects sponsored by the government or a statutory authority with no past history of non-completion. HDFC Bank’s page describes the same practice. Disbursement starts when you submit the original property documents. For an under-construction flat, it is “done in tranches according to the construction linked payment plan provided by the developer”. HDFC Bank calls each instalment a “part” or “subsequent” disbursement. For a resale flat, the page says the full loan is disbursed when the sale deed is executed. Paragraph 337 of the Responsible Business Conduct Directions says the bank must disburse on time, as the sanction terms say.

1. The builder sends you a demand letter that names a construction stage.
2. Check the stage against your agreement for sale, the K-RERA quarterly update and the site.
3. Send the demand to the bank with the form or request it asks for.
4. The bank pays the builder the share for that stage. Keep the builder’s receipt.
5. Pay your own contribution for that stage, if the loan does not cover all of it.

While the loan is only part disbursed, you pay interest on the amount released. HDFC Bank calls this pre-EMI: the monthly interest you pay until the loan is fully disbursed. Its page says that the full EMI usually starts after the last disbursement. You can also choose to start EMIs from the first disbursement. The subvention and 20:80 plans guide covers schemes in which the builder pays this interest for a period.

Flat type	How the loan is released	Source
Under construction	In stages linked to construction, no upfront disbursal	RBI Credit Facilities Directions, paragraph 116
Government or statutory authority project	As per that authority’s payment stages, if it has no history of non-completion	RBI Credit Facilities Directions, paragraph 117
Resale	Full amount when the sale deed is executed (HDFC Bank)	HDFC Bank home loan page

3.13.6 What happens to your property documents after you repay the loan?

After you repay the loan in full, the bank must return your original property documents within 30 days. Paragraph 354 of the RBI Responsible Business Conduct Directions, 2025 sets this rule for personal loans. RBI’s definition of personal loans includes housing loans. The bank must also remove any charge it registered with a registry within the same 30 days. Paragraph 355 lets you collect the documents from the branch that serviced the loan, or from another office of the bank where they are held. For a delay past 30 days, paragraph 358 makes the bank give you reasons. If the bank caused the delay, it pays you ₹5,000 for each day. If the bank loses or damages the documents, paragraph 359 makes it help you get certified copies and bear the cost. It gets 30 more days for this, so the compensation starts after 60 days in total. So keep your sanction letter until the loan is closed and the documents are back.

Event	What the bank must do	RBI paragraph
Full repayment	Return original documents and remove the charge within 30 days	354
Place of collection	Branch that serviced the loan, or another office, as you prefer	355
Delay caused by the bank	Pay ₹5,000 for each day of delay	358
Documents lost or damaged	Help get certified copies, bear the cost, 30 more days	359

Sachi reads the K-RERA quarterly updates for Bangalore projects. To check a project’s stage before you send a demand to your bank, Ask Sachi.