How to Get a Home Loan in India: A Complete Guide for Property Buyers in 2024

Buying a home is a dream for many, but the rising property prices make it challenging. Home loans provide a practical solution, helping buyers afford their dream property. With over 60% of urban Indians relying on home loans, understanding the process is essential. This guide explains everything you need to know—from eligibility and interest rates to documentation, repayment strategies, and government schemes—to help you make informed decisions.

1. Importance of Home Loans in India

Home loans play a crucial role in property purchases due to their:

Affordability: Repay over 20–30 years in smaller installments.
Tax Benefits: Deductions available on principal and interest payments under Sections 80C and 24B of the Income Tax Act.
Flexibility: Borrowers can choose between fixed, floating, or hybrid interest rates.

The Indian home loan market is projected to grow at a CAGR of 22% from 2023 to 2028 (CRISIL Report), indicating its increasing importance.

2. Types of Home Loans in India

Different types of home loans cater to varied needs:

Home Purchase Loans – For buying a new or resale property.
Home Construction Loans – For building a house on owned land.
Home Improvement Loans – For renovating an existing property.
Balance Transfer Loans – To switch to a lender with lower interest rates.
Plot Loans – For purchasing land (not necessarily for construction).

It is important to compare loan types based on financial goals before applying.

3. Home Loan Eligibility Criteria

Lenders evaluate borrowers based on:

Age: 21–65 years.
Income: Minimum monthly requirement varies (₹25,000 for Tier 2 cities, ₹50,000 for metros).
Credit Score: 750+ improves approval chances.
Employment Stability: Salaried individuals require 2+ years of experience, while self-employed need 3+ years in business.

Example: A 30-year-old IT professional earning ₹12 lakh annually secured a ₹50 lakh loan at 8.5% interest.

4. Essential Documents for Home Loan Approval

Applicants must submit the following:

Identity Proof: Aadhaar, PAN, or copyright.
Address Proof: Utility bills, rental agreement.
Income Proof: Salary slips (for salaried) or ITR (for self-employed).
Property Documents: Sale deed, NOC, approved building plan.
Bank Statements: Last six months.

Many lenders now accept e-KYC for faster processing.

5. Home Loan Interest Rates: Fixed vs. Floating

Interest rates significantly impact repayment costs:

Fixed Rates: Constant throughout the loan tenure, offering stability.
Floating Rates: Vary with market trends, initially lower but unpredictable.
Hybrid Rates: A mix of fixed and floating rates.

As of 2024, home loan interest rates in India range from 8.4% to 12%.

6. Home Loan EMI Calculation

Equated Monthly Installments (EMI) depend on:

Loan amount.
Interest rate.
Tenure.

Formula:
$(1+R)^N}{(1+R)^N - 1}$
(where P = principal, R = monthly interest rate, N = tenure in months)

Example: A ₹50 lakh loan at 9% interest over 20 years results in an EMI of ₹44,986.

7. Home Loan Application Process

Steps to secure a home loan:

Pre-Approval – Lender estimates eligibility and loan amount.
Application Submission – Documents and processing fee submitted.
Verification – Lender checks credit score, income, and property details.
Sanction Letter – Loan approval with terms and conditions.
Disbursement – Funds transferred to seller or builder.

Tip: Pre-approved loans offer better bargaining power in competitive markets.

8. Factors Affecting Home Loan Approval

Lenders assess:

Credit History – Late payments or defaults lower approval chances.
Debt-to-Income Ratio – Should be below 50%.
Property Valuation – Market value and legal status are verified.
Co-Applicants – Applying with a spouse or parent improves eligibility.

Example: A couple earning ₹18 lakh jointly secured a ₹1 crore loan by applying together.

9. How to Negotiate the Best Home Loan Interest Rate

Borrowers can reduce interest rates by:

Comparing lenders and using online tools.
Maintaining a credit score above 800 for better rates.
Choosing shorter tenures to lower overall interest costs.
Negotiating with banks, especially for existing customers.

Stat: A 0.5% reduction on a ₹50 lakh loan saves ₹2.5 lakh over 20 years.

10. Home Loan Tax Benefits

Borrowers can claim deductions under:

Section 24B: Up to ₹2 lakh on interest paid.
Section 80C: Up to ₹1.5 lakh on principal repayment.
Additional Deduction: ₹1.5 lakh for affordable housing (property value under ₹45 lakh).

Example: A ₹50 lakh loan can save ₹4 lakh in taxes over five years.

11. Common Mistakes to Avoid When Taking a Home Loan

To avoid financial stress:

Check for Hidden Charges – Processing fees, prepayment penalties, legal costs.
Borrow Within Your Means – Avoid overborrowing beyond budget.
Verify Property Legality – Ensure there are no legal disputes.
Read Loan Terms Carefully – Understand foreclosure and prepayment clauses.

Tip: Use an EMI calculator to plan your budget before applying.

12. Prepayment & Foreclosure: Reducing Your Loan Tenure

Paying off a loan early saves interest. Methods include:

Prepayment – Extra EMI payments or lump sum amounts.
Foreclosure – Closing the loan before tenure ends.

Some lenders charge 2–5% of the outstanding amount as a prepayment penalty.

Stat: Prepaying 10% of the loan annually can reduce tenure by 5 years.

13. Government Schemes for Affordable Home Loans

Borrowers can benefit from:

Pradhan Mantri Awas Yojana (PMAY) – Up to ₹2.67 lakh subsidy for EWS/LIG groups.
Credit Linked Subsidy Scheme (CLSS) – Interest subsidies for MIG.
State-Specific Housing Schemes – Maharashtra’s Griha Aadhar Scheme, etc.

These schemes make home loans more affordable for middle and lower-income groups.

Conclusion

Securing a home loan in India doesn’t have to be complex. By understanding eligibility, interest rates, documentation, and government schemes, buyers can make well-informed decisions. Proper planning, loan comparison, and negotiation can help save money and ease the repayment process.

At AroundTown Realty, we go beyond real estate services—we’re your trusted partner in home loans, property selection, and legal documentation. Whether you’re a first-time buyer or a seasoned investor, our team ensures a seamless and stress-free home-buying experience.

Visit: https://aroundtownrealty.in/