Types of Home Loans in India – Full Guide

Types Of Home Loans In India: A Complete Guide

Apr 30, 2025

Getting a home in India? Awesome! But let’s talk about home loans. There's a bunch of different ones, and it pays to know what they're all about. This guide will give you the lowdown of different types of home loans, and the types of housing finance, so you can pick the best fit.

Understanding Home Loans in India

Think of a home loan as a helping hand from a bank or non-banking financial companies (NBFCs). They lend you the money you need to buy or build your place, and you pay them back bit by bit each month for, say, 10 to 30 years.

Home loans come in various types, depending on the needs and requirements of the borrower. As of March 2024, India's housing finance sector has experienced significant growth. Outstanding individual housing loans reached approximately ?33.53 lakh crore, reflecting a 14% year-on-year increase.

Types of Home Loans in India

Type of Home Loan	Description	Key Features	Documents Required
Home Loan for Buying Ready Property	A loan for purchasing a ready-to-move-in property such as a house, apartment, or flat.	- Disbursed in full at once. - EMIs start after disbursement. - Fixed or floating interest rates. - Loan tenure can be up to 30 years.	- Identity Proof (Aadhaar, Passport, Voter ID) - Address Proof (Utility Bill, Passport) - Income Proof (Salary Slip, IT Returns) - Property documents (Sale Agreement, Title Deed)
Home Loan for Purchase of Under-Construction Property	A loan for purchasing a property still under construction, disbursed in stages.	- Loan disbursed in installments based on construction progress. - Repayment starts once the property is ready for possession. - Additional stipulations due to construction delays.	- Identity Proof (Aadhaar, Passport, Voter ID) - Address Proof (Utility Bill, Passport) - Income Proof (Salary Slip, IT Returns) - Property documents (Construction Agreement, Title Deed)
Loan for Plot Purchase and Construction	A loan for buying land and constructing a home on it, disbursed in two stages.	- First stage covers the plot purchase, and second stage covers construction. - Higher loan-to-value ratio. - Terms may vary based on the lender.	- Identity Proof (Aadhaar, Passport) - Address Proof (Utility Bill, Passport) - Income Proof (Salary Slip, IT Returns) - Property documents (Land Title, Sale Deed, Plot Registration) - Construction plans and budget estimate
Home Loan for Home Improvement and Renovation	A loan for renovating or upgrading an existing property (e.g., adding a room or renovating a kitchen).	- Loan amount based on estimated renovation cost. - Flexible repayment options. - Can be used for home additions, remodeling, etc.	- Identity Proof (Aadhaar, Passport, Voter ID) - Address Proof (Utility Bill, Passport) - Income Proof (Salary Slip, IT Returns) - Property documents (Ownership Proof, Sale Deed) - Renovation estimate from a contractor
Balance Transfer of Home Loan	Allows transferring an existing home loan to another lender with better terms.	- Reduces EMI or loan tenure depending on the new lender's offer. - Can include a top-up loan. - Transfer fees may apply.	- Loan Repayment Statements from current lender - Identity Proof (Aadhaar, Passport) - Address Proof (Utility Bill, Passport) - Income Proof (Salary Slip, IT Returns) - Property documents (Title Deed, Sale Agreement)
Home Entity Loan (Corporate Home Loan)	A loan for businesses or corporate entities to acquire residential property or construct housing.	- Loan amount and repayment terms differ from personal home loans. - Suitable for corporate housing or employee housing.	- Business Registration Proof - PAN Card of the business or organization - Financial Statements (Balance Sheet, P&L) - Property documents (Land Title, Sale Agreement)
Government-Backed Home Loan Schemes (PMAY)	Government-backed subsidy scheme for first-time homebuyers from EWS, LIG, and MIG categories.	- Offers interest rate subsidies based on income categories. - Helps make home loans more affordable. - Aimed at low and middle-income groups.	- PMAY application form - Identity Proof (Aadhaar, Voter ID) - Income Proof (Salary Slip, IT Returns) - Income certificate (for subsidy eligibility) - Property documents (Sale Deed, Title Deed)
NRI Home Loan	Home loan options available to Non-Resident Indians (NRIs) for purchasing property in India.	- Typically higher interest rates. - EMI payments from NRI bank accounts. - Additional documentation required.	- Passport and Visa Copy - NRI Bank Account details (for EMI payments) - Address Proof (Abroad and in India) - Income Proof (Salary Slip, Bank Statements, IT Returns from Abroad) - Property documents (Sale Agreement, Title Deed)
Joint Home Loan	A loan availed by two or more individuals (e.g., spouses, partners) to jointly purchase a property.	- Combines incomes for higher loan eligibility. - Both borrowers share repayment responsibility. - Tax benefits under Section 80C and 24.	- Identity Proof (Aadhaar, Passport, Voter ID) - Address Proof (Utility Bill, Passport) - Income Proof (Salary Slip, IT Returns) - Property documents (Sale Deed, Title Deed) - Marriage Certificate (if applicable)
Pradhan Mantri Awas Yojana (PMAY)	Government scheme to provide affordable housing through interest subsidies for low and middle-income groups.	- Interest subsidies for first-time homebuyers. - Available to economically weaker sections (EWS), low-income (LIG), and middle-income groups (MIG).	- PMAY application form - Identity Proof (Aadhaar, Voter ID) - Income Proof (Salary Slip, IT Returns) - Property documents (Sale Deed, Title Deed) - Income certificate (for subsidy eligibility)
Loan for Land Purchase	A loan to buy land, either for agricultural or residential purposes.	- Higher interest rates compared to home loans. - Shorter repayment periods. - Requires proof of land title and intended use.	- Identity Proof (Aadhaar, Passport) - Address Proof (Utility Bill, Passport) - Income Proof (Salary Slip, IT Returns) - Property documents (Land Title, Sale Deed) - Land use certificate (if applicable)

Eligibility Criteria for Home Loans

Here's a summary of the eligibility criteria for home loans in India:

Age:

Minimum: 18-21 years.
Maximum: 60-65 years at loan maturity.

Income:

Salaried: Stable income for 1-2 years.
Self-employed: Stable business income for 2-3 years.
Minimum income requirement varies by lender.

Credit Score:

Typically, 650-700 or above for eligibility.
Higher credit score can get better terms.

Employment Status:

Salaried: Must be employed with a stable job.
Self-employed: Proof of stable business income.
Retired: Pension must be sufficient to cover EMI.

Existing Liabilities:

Debt-to-income ratio should generally not exceed 50-60% of monthly income.

Property Documents:

Clear title, no legal disputes, and approved by authorities.

Nationality:

Indian citizens and NRIs (with additional documentation) are eligible.

Co-applicant:

A co-applicant may be required if the primary applicant’s income is insufficient.

Down Payment:

The borrower must contribute 10-20% of the property value.

Conclusion

In India, the types of home loans and types of housing finance options, such as home entity loans, loans for plot purchase and construction, and government-backed schemes like PMAY, can be overwhelming. Understanding these options will help you select the right loan for your needs. Companies like Cityprop can assist in evaluating your financial capacity and guiding you toward the best loan to fund your dream home.

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