Understanding Real Estate Financing Options in India

The real estate market in India is one of the most dynamic and rapidly evolving sectors. With the country's growing population, urbanisation, and increasing income levels, the demand for residential, commercial, and industrial properties has skyrocketed. However, with rising property prices, many prospective buyers and investors find it challenging to fund real estate purchases solely with personal savings. To address this, a variety of financing options have emerged in India to help individuals and businesses acquire real estate. Understanding these financing options is essential for anyone looking to invest in real estate in India, whether you're a first-time homebuyer, an investor, or a developer.

1. Home Loans

Home loans are one of the most common and straightforward ways to finance real estate in India. These loans are provided by banks, non-banking financial companies (NBFCs), and housing finance companies. Home loans are typically used by individuals who wish to buy a home but cannot pay the full amount upfront.

Eligibility: To avail of a home loan in India, individuals must meet certain eligibility criteria, including a stable income, a good credit score, and the ability to repay the loan. The loan amount is usually a percentage of the property’s market value, typically 75%-90%, depending on the applicant's profile.

Interest Rates: Home loan interest rates can be fixed or floating. Fixed rates remain constant throughout the loan term, while floating rates fluctuate with market conditions and the lender's benchmark rate.

Repayment: Home loans in India typically have repayment terms of 10 to 30 years. The repayment schedule involves monthly instalments, which include both principal and interest.

2. Loan Against Property (LAP)

A Loan Against Property (LAP) is another popular financing option for real estate in India. This type of loan allows individuals or businesses to borrow money by mortgaging their existing property, be it residential, commercial, or industrial. LAP can be used for a variety of purposes, including purchasing new property or expanding existing property holdings.

Eligibility: LAP eligibility depends on the property's market value, the borrower’s credit score, and income. Unlike home loans, where the loan is granted to purchase a property, a LAP is granted based on the property you already own.

Interest Rates: LAPs usually offer lower interest rates than personal loans, as the loan is secured by the property. Interest rates range from 9% to 16%, depending on the lender and the borrower’s profile.

Repayment: The tenure of a LAP can extend from 5 to 20 years, and the borrower can repay in equated monthly instalments (EMIs).

3. Government Schemes and Subsidies

The Indian government offers several schemes to promote affordable housing and real estate development, especially for first-time homebuyers. Programs such as the Pradhan Mantri Awas Yojana (PMAY) provide financial assistance in the form of subsidies on home loan interest rates for economically weaker sections (EWS) and lower-middle-income groups (LIG).

Eligibility: Eligibility for government schemes typically depends on the applicant’s income level, family status, and property location.

Interest Rates: The government often subsidises home loans, reducing interest rates. For instance, under the PMAY scheme, eligible applicants can avail of an interest subsidy of up to 6.5% on home loans for the purchase or construction of houses.

4. RBI Repo Rate and Real Estate Financing

The Repo Rate is a critical macroeconomic tool used by the Reserve Bank of India (RBI). It affects liquidity in the financial system and can significantly influence real estate financing and home loan costs.

What is the Repo Rate?

The repo rate is the interest rate at which the RBI lends short‑term funds to commercial banks against government securities. Changes in the repo rate influence lending rates across the economy, including home loans.

Repo Rate in January 2026

As of January 2026, the RBI’s repo rate stands at 5.25 %. This followed a reduction from previous years aimed at stimulating economic growth amid easing inflation conditions.

How the Repo Rate Affects Real Estate Loans

Home Loan Interest Rates

When the repo rate decreases, banks can borrow funds more cheaply from the RBI. In turn, they may reduce interest rates on home loans, making EMIs smaller and borrowing more affordable.
Loan Eligibility and Access
Lower interest rates can improve a borrower’s ability to qualify for higher loan amounts since lower EMIs reduce the debt burden relative to income.

Refinancing Opportunities
If the repo rate falls significantly, existing borrowers may consider refinancing their home loans to benefit from lower interest rates, thereby reducing overall interest costs.

Why Repo Rate Matters for Buyers

• Lower borrowing costs: Prolonged low repo rates can make property purchases more affordable over the long term.
• Market sentiment: Friendly monetary policy can boost demand and encourage lenders to expand credit availability.
• Real estate investment: Lower interest costs may make property investment more attractive for potential buyers.

Understanding the range of real estate financing options in India is essential for making informed, confident decisions. Home loans remain the most popular financing avenue due to their favourable terms and long tenures. Meanwhile, personal loans and loans against property offer alternative routes in different circumstances.

Importantly, the RBI repo rate plays an influential role in shaping loan affordability and overall financing costs. With the repo rate at 5.25 % in January 2026, borrowers may enjoy a relatively lower interest environment, but it’s critical to monitor RBI policy shifts, as future rate changes can impact your long‑term financing strategy.