The Complete Guide to Home Loans in India

What is a Home Loan in India?

A home loan is a long-term secured loan offered by banks and housing finance companies (HFCs) to purchase, construct, or renovate a residential property. The property serves as collateral for the loan, which typically has a tenure of 5 to 30 years with competitive interest rates compared to other loan types.

In India, home loans come with attractive tax benefits under Section 24(b) for interest payments and Section 80C for principal repayments, making them a preferred financing option for home buyers.

Types of Home Loans in India

1. Purchase Loan

For buying a new or resale residential property from the market.

2. Construction Loan

For building a new house on land you already own.

3. Plot Loan

For purchasing a residential plot with intent to construct later.

4. Home Extension Loan

For expanding or extending your existing home.

5. Home Improvement Loan

For renovation or repairs of existing property.

6. Balance Transfer

To transfer existing home loan to another lender for better rates.

7. Pradhan Mantri Awas Yojana (PMAY)

Government subsidized home loans for EWS/LIG/MIG categories.

How Home Loans Work in India

The home loan process in India typically follows these steps:

1. Eligibility Check: Assess your repayment capacity based on income, age, existing obligations.
2. Property Selection: Identify property within budget and verify legal documents.
3. Loan Application: Submit application with KYC, income, and property documents.
4. Processing & Verification: Lender verifies documents and conducts technical/legal appraisal.
5. Sanction Letter: Loan approved with amount, rate, terms and conditions.
6. Property Valuation: Lender's empaneled valuer assesses property market value.
7. Legal Check: Verification of property title and legal documents.
8. Loan Disbursement: Amount released directly to builder/seller in stages.
9. EMI Payments: Monthly installments begin after full disbursement or as per agreement.

Home loan amounts in India typically range from ₹5 lakhs to ₹10 crores, with repayment tenures from 5 to 30 years. Interest rates vary from 8.40% to 12% p.a. depending on loan amount, borrower profile, and market conditions.

Home Loan Interest Rates and Charges in India

Bank/NBFC	Interest Rate (2023)	Max Loan Amount	Max Tenure
SBI	8.40% - 9.65%	₹15 crores	30 years
HDFC Ltd	8.50% - 9.75%	₹10 crores	30 years
LIC Housing	8.55% - 9.85%	₹15 crores	30 years
ICICI Bank	8.60% - 9.90%	₹10 crores	25 years
Axis Bank	8.70% - 10.05%	₹5 crores	25 years

Common Charges:

• Processing fee: 0.25% to 1% of loan amount + GST
• Administrative charges: ₹5,000 to ₹20,000
• Technical/legal valuation: ₹2,000 to ₹10,000
• Prepayment charges: 0-2% for floating rate loans
• Late payment penalty: 1-2% of EMI amount

Pros and Cons of Home Loans in India

Advantages:

• Enables home ownership without full upfront payment
• Tax benefits on both principal and interest payments
• Long repayment tenure reduces EMI burden
• Lower interest rates compared to other loan types
• Option for joint applications with spouse/co-owners

Disadvantages:

• Lengthy documentation and approval process
• Property serves as collateral - risk of seizure on default
• Additional costs like registration, insurance, maintenance
• Interest rate fluctuations can affect EMI amounts
• Long-term financial commitment

How to Get a Home Loan in India

Follow these steps to secure the best home loan deal:

1. Check Your Credit Score

A CIBIL score above 750 gets better rates. Get free reports from CIBIL/Experian.

2. Calculate Your Eligibility

Most banks offer up to 60-80% of property value as loan. Use online eligibility calculators.

3. Compare Rates on Paisabazaar/BankBazaar

Compare interest rates, processing fees, and other charges across lenders.

4. Get Pre-Approval

Obtain in-principle approval to know your exact budget before property hunting.

5. Organize Documents

Keep ready: KYC, income proofs, property documents, bank statements.

6. Negotiate with Lender

Bargain for lower rates, especially if you have good credit or existing relationship.

7. Understand All Charges

Clarify processing fees, prepayment penalties, insurance requirements.

Tax Benefits on Home Loans in India

1. Interest Deduction (Section 24(b))

Up to ₹2 lakhs per year for self-occupied property. No limit for let-out property.

2. Principal Repayment (Section 80C)

Up to ₹1.5 lakhs per year included in overall 80C limit.

3. Additional Deduction (Section 80EEA)

Extra ₹1.5 lakhs interest deduction for first-time home buyers (conditions apply).

4. Joint Loan Benefits

Both co-applicants can claim separate deductions if they co-own the property.

Frequently Asked Questions

What is the EMI per lakh for home loans?

For ₹1 lakh at 8.5% interest: ₹772 for 20 years, ₹621 for 30 years tenure.

Can I get 90% home loan in India?

For properties below ₹30 lakhs, some lenders offer up to 90% financing. Typically 75-80% for higher values.

How much salary is needed for ₹50 lakh home loan?

Approx ₹1.25 lakhs monthly income for ₹50 lakh loan at 60% FOIR (assuming no other EMIs).

What is the minimum CIBIL score for home loan?

Most banks require 650+, but 750+ gets better rates. Some lenders may consider lower scores with higher interest.

Can NRI get home loan in India?

Yes, most banks offer home loans to NRIs with additional documentation like work visa, overseas bank statements.