How Home Loans Work in India

The basics of Indian home loans, including loan-to-value limits set by the RBI, typical tenures and how lenders decide how much to lend.

Buying a home is the largest purchase most Indian families make. Most buyers use a home loan.

Loan-to-value limits

The RBI caps how much of a home’s value banks can lend, called the loan-to-value (LTV) ratio:

Up to 90 percent for loans up to 30 lakh rupees.
Up to 80 percent for loans between 30 and 75 lakh.
Up to 75 percent for loans above 75 lakh.

The rest must come from the buyer’s down payment. Lower LTV caps on bigger loans reduce risk.

Tenure

Home loans often run for 15 to 30 years. Lenders may limit tenure so the loan ends by retirement age.

Interest rates

Most Indian home loans have floating rates linked to external benchmarks like the RBI repo rate, so EMIs change when policy rates move. Some lenders offer fixed rates for a few years.

What lenders check

Income and job stability.
Credit score.
Existing EMIs.
Age.
Property legality and valuation.

Tax benefits

Under the old tax regime, home loan principal counts toward the 80C limit and interest on a self-occupied home is deductible up to 2 lakh rupees.

Why home loans matter

Housing loans are among the safest for banks, as defaults are relatively low and loans are secured by property. They’ve grown into a large share of retail lending.

The down payment

A couple wants a flat worth 60 lakh rupees. The RBI's 80 percent cap means they can borrow up to 48 lakh; they must arrange 12 lakh plus registration costs from savings and family help.

Thinking banks can lend the full property price

RBI loan-to-value limits require buyers to contribute a down payment.

Key takeaways

The RBI caps loan-to-value at 90, 80 or 75 percent depending on loan size.
Home loans often run 15 to 30 years with floating rates.
Lenders check income, credit score, existing EMIs and property legality.
Old-regime tax benefits cover principal and interest.