Home Loans in India — EMI, Rates & Eligibility

Summary

Indian home loans (called “housing loans”) use an EMI (Equated Monthly Instalment) structure where borrowers repay a fixed amount each month over a tenure of up to 30 years. Most loans are floating-rate, linked to the RBI repo rate via the External Benchmark Lending Rate (EBLR) system. Average rates are around 7.25% as of early 2026.

How it works

EMI formula

EMI = P x r x (1 + r)^n / ((1 + r)^n - 1)

Where P = principal, r = monthly interest rate, n = number of monthly instalments.

Floating vs fixed rates

Since October 2019, RBI mandates that all new floating-rate retail loans be linked to an external benchmark (repo rate, T-bill rate, or FBIL rate). Most banks use the repo rate. When the repo rate changes, your EMI or tenure adjusts accordingly.

Fixed-rate home loans exist but are rare and typically 1-2% higher than floating rates.

Eligibility and LTV

• Loan-to-Value (LTV): Up to 80% for loans above Rs 30 lakh; up to 90% for loans up to Rs 30 lakh (per RBI guidelines)
• Typical tenure: 15-30 years
• FOIR (Fixed Obligations to Income Ratio): Banks typically cap total EMIs at 50-60% of net monthly income

Tax benefits (old regime)

• Section 24(b): Deduction on interest paid, up to Rs 2 lakh/year for self-occupied property
• Section 80C: Deduction on principal repayment, up to Rs 1.5 lakh/year

Worked example

Property: Rs 1.25 crore, Down payment: 20% (Rs 25 lakh), Loan: Rs 1 crore, Rate: 7.25%, Tenure: 20 years

1. Monthly rate: 7.25% / 12 = 0.604%
2. Number of EMIs: 240
3. EMI = Rs 1,00,00,000 x 0.00604 x 1.00604^240 / (1.00604^240 - 1) = Rs 78,913
4. Total repayment: Rs 78,913 x 240 = Rs 1,89,39,120
5. Total interest paid: Rs 89,39,120

In year 1, roughly Rs 60,400 of each EMI goes to interest and Rs 18,500 to principal.

Key differences from other markets

• EBLR transmission: Indian floating rates adjust with the repo rate, making EMIs more volatile than UK tracker mortgages which have longer reset periods.
• No early repayment penalty: RBI prohibits prepayment charges on floating-rate home loans, unlike many Western markets where break fees apply.