A 4% interest subsidy on the first ₹8 lakh principal is available for urban buyers in 2026 when selecting from the main types of home loans in India. Key types of home loan options—ranging from home purchase and plot loans to balance transfers—are ordered by primary purpose and regulatory features to optimize borrowing costs under Section 24(b).
Types of Home Loans at a Glance
| Loan Type | Primary Purpose | Key Regulatory Feature | Maximum Tenure |
|---|---|---|---|
| Home Purchase Loan | Purchase ready-to-move-in or new residential property or flats | Up to 90% LTV ratio for loan amounts up to ₹30 lakh | Up to 30 years |
| Plot Loan / Land Purchase Loan | Purchase residential plot or land for future construction | LTV ratio capped between 75% and 80% of land value | Up to 20 years |
| Home Construction Loan | Construct an independent residential house on owned land | Tranche disbursements linked directly to construction stages | Up to 30 years |
| Home Extension Loan | Add structural space, extra rooms, or floors to existing house | Tax deduction benefits available under Section 24(b) | Up to 15 years |
| Home Improvement Loan | Renovate, repair, paint, or upgrade interior fittings | Tax deduction eligible up to ₹30,000 per fiscal year | Up to 15 years |
| Home Loan Balance Transfer | Transfer existing loan balance to a new lender for lower interest rate | Reduces net interest liability and monthly EMI outgo | Up to remaining tenure (Max 30 years) |
| Home Loan Top-Up | Avail additional funds over an active home loan for personal use | Section 24(b) tax benefits apply if utilized for home repairs | Up to parent loan tenure |
| NRI Home Loan | Enable Non-Resident Indians to acquire residential units in India | Allows joint applicants and global income evaluation | Up to 30 years |
| PMAY Urban 2.0 Affordable Housing Loan | Provide subsidized credit to EWS, LIG, and MIG urban buyers | 4% interest subsidy on the first ₹8 lakh loan principal | Up to 20 years |
| Fixed-Rate Home Loan | Lock in constant interest rates throughout the loan tenure | Carries a 1% to 2% pricing premium over floating rates | Up to 30 years |
| Floating-Rate Home Loan | Variable rates linked directly to RBI EBLR or bank repo rate | Zero prepayment or foreclosure penalty under RBI guidelines | Up to 30 years |
| Extended-Tenure Home Loan | Extend repayment period beyond standard 30-year limit | Lowers monthly EMI obligations for young first-time buyers | Above 30 years |
Choosing the correct home loan structure ensures maximum tax efficiency under Section 24(b) and Section 80C while keeping total borrowing costs optimized over the complete loan lifecycle.
Home Purchase and Home Construction Loans
Home purchase loans fund ready-to-move or under-construction properties, while home construction loans cover self-building on owned plots.
Home purchase loans disburse funding in single or installment payouts based on developer milestones. RBI guidelines allow a Loan-to-Value (LTV) ratio of up to 75–90% of property value, requiring borrowers to contribute 10% to 25% as a down payment. Maximum repayment tenures extend up to 30 years.
Home construction loans require stage-wise disbursal based on physical verification of construction progress. Borrowers must submit approved architectural layouts and estimated construction costs before initial loan sanction.
Borrowers must submit physical completion certificates from registered civil engineers to fully convert pre-EMI tranches into standard EMIs.
Plot Loan, Home Extension and Home Improvement Loans
Plot loans, home extension loans, and home improvement loans serve distinct physical needs beyond purchasing built flats.
Plot loans allow buyers to purchase residential land, provided construction commences within specified timelines mandated by the lender.
Home extension and improvement loans fund civil additions or repairs on existing residential units. Extension loans cover structural additions, such as building extra bedrooms or floors, while improvement loans finance painting, flooring, and electrical repairs.
| Loan Type | Primary Purpose | Maximum LTV Ratio | Tax Deduction Status | Mandatory Requirement |
|---|---|---|---|---|
| Home Extension Loan | Structural additions or extra rooms | 75% to 85% of estimate | Section 24(b) interest deduction | Approved building plan |
| Home Improvement Loan | Repairs, painting, and renovation | 70% to 80% of estimate | Up to ₹30,000 per year under Section 24(b) | Architect's detailed cost estimate |
| Plot-Plus-Construction Loan | Land purchase and simultaneous construction | Up to 80% of combined cost | Section 80C and Section 24(b) upon completion | Construction start within 12 months |
Borrowers combining plot purchase with construction obtain unified disbursements and lower effective processing charges.
Balance Transfer and Top-Up Loans
Home loan balance transfers allow borrowers to switch their outstanding loan balance to a new lender offering lower interest rates, with top rates starting at 7.10% p.a. in 2026. Borrowers can also opt for top-up loans above their existing principal to finance personal or construction requirements at housing loan rates rather than higher personal loan rates.
A home loan balance transfer is primarily used to reduce total interest outflow over long tenures. Top-up loans provide additional funds, generally capped up to 100% of the original sanction limit or maximum property LTV limits set by the lender.
| Lender Name | Max Top-Up Loan Tenure |
|---|---|
| State Bank of India (SBI) | Up to 30 years or balance tenure |
| Bank of Baroda | Up to 30 years (or remaining home loan tenure) as of 2026 |
| Punjab National Bank (PNB) | Up to 10 years or the remaining period of the housing loan, whichever is lower (as of September 2025) |
| Canara Bank | Up to 10–15 years |
| HDFC Bank | Up to 15 years or until the age of retirement/remaining tenure, whichever is lower (as of September 2026) |
| ICICI Bank | Up to 20 years |
| Kotak Mahindra Bank | Up to balance home loan tenure |
| Axis Bank | Up to 15 years or the residual parent loan tenure, whichever is lower (as of June 2025) |
| Bank of Maharashtra | Up to 15 years |
| Equitas Small Finance Bank | Up to 15 years for top-up loans / loans against property, whereas home loans offer up to 20 years with a limit up to ₹300 lakh |
Switching a home loan is subject to foreclosure charges on fixed rates, whereas RBI mandates nil prepayment penalties on floating-rate balance transfers for individual borrowers.
NRI Home Loans and Loans Under PMAY
PMAY Urban 2.0 provides an interest subsidy of ₹1.80 lakh with a maximum net present value of ₹1.50 lakh calculated at an 8.5% discount rate. Non-Resident Indians can secure housing finance in India with repayment tenures reaching 30 years.
Under PMAY Urban 2.0 (effective 01 September 2024), the 4% interest subsidy on the first ₹8 lakh of the home loan amount is calculated for a tenure of up to 12 years, not 20 years. Eligible urban home buyers receive this direct financial credit through registered primary lending institutions. The loan-to-value ratio for these affordable housing loans ranges between 75% and 90% of the property value under RBI guidelines.
NRI home loans cater to Non-Resident Indians and Persons of Indian Origin purchasing residential property or housing plots in India. Lenders like Bank of India and Union Bank offer housing finance for eligible NRI applicants. NRI borrowers can execute loan agreements remotely by appointing a resident Power of Attorney in India to process property registration.
Fixed, Floating and Hybrid Rate Home Loans
Floating rate home loans in India start at 7.10% p.a. in 2026. Fixed interest rates carry a 1% to 2% pricing premium over floating options.
| Loan Structure / Lender | Rate Category | Key Feature / Benefit |
|---|---|---|
| Fixed Rate Home Loan | Fixed Interest Rate | Predictable EMIs; priced 1% to 2% higher than floating rates |
| Floating Rate Home Loan | Repo-Linked Floating Rate | Linked to RBI repo rate; zero prepayment penalty for individual borrowers |
| Hybrid Rate Home Loan | Fixed + Floating Combination | Fixed rate for initial 2-3 years, then switches to market-linked floating rate |
| Bank of India Home Loan | Floating & Fixed Options | BOI Star Home Loan floating rate options |
| Union Bank of India Home Loan | Floating Interest Rate | EBLR-linked interest rates with repayment tenure up to 30 years |
| SBI Home Loan | Floating Interest Rate | State Bank of India offers home loans with EBLR-linked floating rates and MaxGain as a floating-rate overdraft facility, but currently offers no fixed-rate home loan options as of September 2026 |
| Federal Bank Home Loan | Floating & Fixed Options | Term loan and overdraft options with rate conversion flexibility |
| Tata Capital Home Loan | Floating Interest Rate | Repayment tenure up to 30 years with digital processing |
| Kotak Mahindra Bank Home Loan | Floating, Fixed & Hybrid | Rate options across floating, fixed, and hybrid structures |
| HDFC Bank Home Loan | Fixed, Floating & Hybrid | Tenure up to 30 years across ready and under-construction properties |
Borrowers choosing floating rate home loans save on interest costs during repo rate reduction cycles. RBI rules prohibit foreclosure penalties on floating rate home loans for individual borrowers.
Tax Benefits by Loan Type
Home loan borrowers in FY 2026-27 can claim tax deductions up to ₹2.0 lakh on interest under Section 24(b) and up to ₹1.5 lakh on principal under Section 80C under the Old Tax Regime. Tax deductions under Section 24(b) and Section 80C for plot loans become available only after house construction is completed, not when construction commences
| Loan Type | Section 24(b) Interest Deduction | Section 80C Principal Deduction | Additional Tax Deductions | Key Tax Eligibility Condition |
|---|---|---|---|---|
| Home Purchase Loan | Up to ₹2.0 lakh per year | Up to ₹1.5 lakh per year | Section 80EEA up to ₹1.5 lakh for eligible affordable housing | Ready-to-move or new residential properties under Old Tax Regime |
| Home Construction Loan | Up to ₹2.0 lakh per year (post-construction) | Up to ₹1.5 lakh per year (post-construction) | Pre-construction interest deductible in 5 equal annual installments | Under Section 24(b), construction must be completed within 5 years from the end of the financial year in which the capital was borrowed, not 5 years from the loan sanction date |
| Plot / Land Purchase Loan | Nil | Nil | Plot purchase loans offer no tax deductions under Section 24(b) and Section 80C until house construction is completed (not when construction begins) | Standard home loan terms apply after construction commences |
| Home Renovation / Improvement Loan | Up to ₹30,000 per year | Not eligible | Included within overall ₹2.0 lakh Section 24(b) limit | Covers repairs, repainting, or structural alterations |
| Home Extension Loan | Up to ₹2.0 lakh per year |
