Sanction vs Disbursement

Sanction and disbursement are two distinct steps in a home loan, and it helps to keep them apart. A sanction is the lender’s in-principle approval: after checking your documents, income, and the property, it confirms the maximum amount it is willing to lend and the terms attached. At this stage no money has moved.

Disbursement is when the lender actually releases the funds. For a ready property bought outright, this is often a single payout. For an under-construction property, however, the lender typically disburses in stages tied to the building’s progress, releasing tranches as each construction milestone is reached rather than handing over the whole amount at once.

Stage-wise disbursement has a knock-on effect on what you pay early in the loan. Until the full amount is released, many borrowers are charged interest only on the portion disbursed so far. This interim payment is the pre-EMI, and your full EMI usually begins once the loan is completely disbursed. The exact arrangement varies, so confirm with your lender how interest is charged during the construction period.

Worked example. Suppose a lender sanctions an amount for an under-construction flat but releases it in three tranches as construction proceeds. You would pay pre-EMI on each released tranche during this phase. To understand how the eventual EMI is built, see how home loan EMI is calculated in India. Once the loan closes, the lender issues an NOC.