A developer sat across from me a few months ago with a rejection letter and a genuine sense of injustice. His project was in a corridor where inventory was selling within months of launch. His own money, about 18 crores of it, was already in the land. Two of his earlier projects had delivered on time. And a large private bank had just declined his construction finance proposal.
His conclusion was that banks do not understand real estate. I hear this a lot, and I understand the frustration behind it. But after years of sitting on both sides of these conversations, I can tell you the more useful truth. Lenders rarely reject projects. They reject proposals. And the difference between the two is almost always fixable.
What does bankability actually mean?
Bankability is not the same as viability. Viability asks whether the project will make money. Bankability asks whether the project fits inside the lender's credit framework, which is a series of specific, checkable boxes. A project can be excellent on the first question and still fail three boxes on the second.
The boxes, roughly in the order credit teams check them:
- Title and approvals
- Promoter contribution and its source
- Repayment capacity, measured as DSCR
- Existing leverage across the group
- Promoter track record, as the lender can verify it
- Sector and geography appetite at that point in the cycle
Let me take the ones that cause the most rejections.
Why does title and approval status matter more than location?
Because a lender cannot enforce security on a property with a defective title, no matter how prime the location is.
Credit teams read title reports the way the rest of us read headlines. One unresolved legal heir, one missing link document from a transaction twenty years ago, one mismatch between the sanctioned plan and what is proposed, and the file slows down or stops. The same applies to approvals. A project that is three approvals away from a commencement certificate is, from the lender's chair, a project that does not exist yet.
The developer I mentioned above failed here, not on viability. His RERA registration covered phase one, his loan proposal was sized for phases one and two. To the credit team, half the ask had no approved project behind it. Once we restructured the proposal to fund phase one alone, with phase two as a pre-agreed top-up upon registration, the same bank sanctioned it in seven weeks.
How much promoter contribution do lenders expect?
More than most first-time applicants budget for, and demonstrated earlier than they expect.
For construction finance, 25 to 40 percent of project cost from the promoter is the common range. Land owned by the promoter usually counts, which helps. But two things trip people up. First, lenders want the contribution deployed before or alongside their money, not promised from future sales. Second, they check the source. Contribution that is itself borrowed, from an NBFC or from the market, gets discounted or rejected because it adds hidden leverage.
I made a version of this mistake myself early in my career, presenting a client's unsecured borrowings as part of promoter contribution because technically the money was in the project. The credit manager took one look at the balance sheet and asked me the question I now ask every client. If your own money is not in this project, why should the bank's be?
What is DSCR and why does it decide your loan amount?
DSCR, the debt service coverage ratio, is the single number that most directly sets how much a lender will give you. It compares the cash your project generates in a period against the principal and interest you owe in the same period. A DSCR of 1.5 means you earn one and a half rupees for every rupee of debt service.
Most lenders want to see at least 1.25 times, and pricing improves visibly above 1.5. If your projections show 1.1, the lender does not usually reject you outright. They shrink the loan until the number works, and you discover the sanctioned amount is 30 crores against the 45 you asked for.
Before any lender runs this number on your project, run it yourself. Our DSCR calculator uses the same thresholds lender credit teams apply, and it takes five minutes. Walking into a lender meeting already knowing your coverage ratio changes the quality of that conversation entirely.
How does existing leverage affect a new project loan?
Lenders underwrite the promoter group, not just the project. Every existing loan across your entities, every guarantee you have signed, every overdraft running near its limit shows up in the credit bureau and the group analysis.
This is where otherwise clean proposals quietly die. The project DSCR looks fine, but the group is carrying unsecured borrowings at high rates, or a guarantee on a relative's stressed business, and the credit committee's risk appetite closes. If this is your situation, it is often better to regularise or consolidate before applying rather than explain after a rejection. And it is worth knowing that banks are not the only route while you repair the balance sheet. I covered the wider menu of options in my article on project finance beyond banks and NBFCs.
What can you fix before applying again?
Almost everything above, which is the point of this article. A rejection usually tells you which box failed, if you ask. Most relationship managers will share the reason informally even when the letter is generic.
Then the fixes are practical. Complete the approvals before the next application. Resize the ask so DSCR clears 1.3 with honest sales assumptions. Document promoter contribution with a clean source trail. Close or consolidate the small expensive borrowings that clutter the group picture. Choose the next lender by sector appetite, because a bank that has just had a bad experience with real estate in your city will say no to files a competitor is actively hunting for. Having your numbers organised in advance also matters more than people think, and I described what that looks like in the article on finance systems that help developers.
What should you do this week?
If you have a live proposal or a recent rejection, do one exercise. Score your own project against the six boxes above, honestly, the way a credit manager who has never met you would. Wherever you hesitate, that is the box to work on before the next application.
And if you would like help reading a rejection or restructuring a proposal for the next attempt, that is precisely the work we do. The project is usually fine. The file is what needs the attention.