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It’s quite common for banks to refuse disbursement of a home loan installment if the construction progress does not match the schedule agreed upon in your loan agreement. Typically, when you take a home loan for an under-construction property, the bank disburses the loan amount in stages—each stage is linked to the builder achieving certain construction milestones. This process is governed by the terms of your loan agreement and is standard banking practice to protect both the borrower and the lender.
The Supreme Court has recognized the importance of adhering to contractual terms in loan disbursement and repayment (see, for example, Syndicate Bank v. R. Veeranna, (2003) 2 SCC 15). If the builder’s progress is delayed or not as per the schedule submitted to the bank, the bank is within its rights to withhold payment until the required stage is completed. This is to ensure that funds are not released for incomplete work, which could put the bank’s security at risk and potentially leave you with an unfinished property.
Your bank’s refusal is not arbitrary—it is based on the tripartite understanding between you, the bank, and the builder. If you believe the builder has completed the stage as per the agreement, you may request the builder to provide updated progress reports or completion certificates, and submit these to the bank for reconsideration. If the builder is at fault, you may also have remedies under The Real Estate (Regulation and Development) Act, 2016 (RERA), which protects homebuyers from construction delays.
In summary, the bank’s refusal is legally justified if the construction stage is not as per the agreed schedule. Your next step should be to coordinate with your builder to ensure compliance and provide the necessary documentation to the bank. If disputes persist, you may consider seeking legal recourse or approaching the consumer forum or RERA authority for redressal.
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Disclaimer: All opinions and views are personal.
Advocate Rajeev K Jha
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