Can construction start before compensation has been paid?

No. Under IFC PS-5 and World Bank ESS-5, compensation must be paid and resettlement assistance provided before people are displaced or access to their land is restricted. Taking possession first, against a promise to pay later, is the single most common serious breach in the field — and it is a breach of a condition the project's financing usually depends on.

The rule, stated precisely

Displacement should not occur before compensation has been paid and, where relevant, resettlement sites and transitional assistance are ready.[1] Paid means received by the entitled person — not instructed, not approved, not budgeted.

Where an entitled person cannot be found or a claim is genuinely unresolvable, many legal frameworks allow the sum to be deposited into a designated account or into court, and possession then follows lawfully. That is a real exception with a paper trail; it is not the same as an undertaking to pay in due course.[3]

Why it happens anyway

Not through carelessness. A works contract has a mobilisation date with liquidated damages attached; the compensation programme depends on a valuation approval queue, a funding release and a handful of unresolved records. When the two collide, the party with the contractual penalty generally wins.[2]

The result is possession taken on partially compensated land, with the households concerned holding neither the land nor the money.

What you can do about it

1. Record it immediately through the grievance mechanism, with dates, and get a reference.
2. Photograph what is happening, dated.
3. Ask for the legal basis in writing — which authority, which notice, and whether the compensation has been deposited anywhere.
4. Raise it with the lender. Every major development finance institution has an independent accountability mechanism that accepts complaints directly from affected people, and taking possession without payment is exactly what they exist to examine.[5]

For a project team

The way to avoid this is decided long before the contractor arrives: define corridor release in sections, make each section's release conditional on every household within it being paid rather than on a percentage, and start work on the documentation tail — deceased owners, contested boundaries, missing identification — on the day those records are created rather than when payment fails.[4]