Home Renovation Loan in India: Interest Rate

Renovating your home can enhance its aesthetics, increase its value, and improve functionality. Whether you need to upgrade interiors, repair structural damages, or install modern amenities, a home renovation loan can provide the necessary financial support.

If you’re planning to apply for a home renovation loan in India, understanding the interest rates, eligibility criteria, and other key factors can help you make an informed decision.

1. What is a Home Renovation Loan?

A home renovation loan is a type of home loan specifically designed to finance repairs, remodeling, and improvements. Many banks and financial institutions in India offer these loans under home loan schemes or personal loan categories.

Unlike regular home loans, these loans cover:

✔ Structural repairs – Fixing walls, ceilings, or plumbing
✔ Interior upgrades – Flooring, painting, kitchen or bathroom remodeling
✔ Electrical work – Installing new wiring or energy-efficient lighting
✔ Furniture & fixtures – Built-in wardrobes, modular kitchens, etc.

2. Home Renovation Loan Interest Rates in India

Interest rates on home renovation loans vary based on the lender, loan amount, and applicant’s profile. Here’s a general overview of current home renovation loan interest rates offered by top banks in India:

Bank	Interest Rate (Approx.)	Loan Tenure	Processing Fees
SBI	8.50% - 9.50% p.a.	Up to 15 years	0.35% - 1%
HDFC Bank	8.75% - 9.90% p.a.	Up to 15 years	0.50% - 1.50%
ICICI Bank	9.00% - 10.50% p.a.	Up to 10 years	0.50% - 1%
Axis Bank	8.90% - 10.75% p.a.	Up to 20 years	1% - 2%
PNB Housing	8.75% - 10.25% p.a.	Up to 15 years	0.50% - 1.25%

(Interest rates are subject to change. Please check with the respective banks for the latest rates.)

Factors Affecting Home Renovation Loan Interest Rates

• Applicant’s Credit Score: A CIBIL score above 750 can help secure lower interest rates.
• Income Stability: Salaried professionals and self-employed individuals with stable incomes get better rates.
• Loan Amount: Higher loan amounts may attract slightly higher rates.
• Loan Tenure: Shorter tenure loans often have lower interest rates.

3. Eligibility Criteria for a Home Renovation Loan

To qualify for a home renovation loan, you must meet certain eligibility conditions:

✔ Age: 21 to 65 years (varies by bank)
✔ Employment Type: Salaried or self-employed individuals
✔ Minimum Income: ₹25,000 per month (varies by lender)
✔ Credit Score: 750+ for best interest rates
✔ Existing Loan Obligations: Low debt-to-income ratio preferred
✔ Property Ownership: Must be an owner or co-owner of the house

4. Documents Required for a Home Renovation Loan

To apply for a home renovation loan, you need to provide the following documents:

Identity & Address Proof:

✔ Aadhaar Card, PAN Card, Passport, Voter ID

Income Proof:

✔ Salaried: Salary slips, bank statements, Form 16
✔ Self-Employed: IT returns, profit & loss statement, business registration

Property & Renovation Documents:

✔ Property ownership proof
✔ Estimated cost of renovation from a contractor or architect

5. How to Apply for a Home Renovation Loan?

Follow these steps to apply for a home renovation loan in India:

Step 1: Research Lenders

Compare interest rates, processing fees, and loan terms from different banks and NBFCs.

Step 2: Check Your Eligibility

Use a home loan eligibility calculator to estimate your loan eligibility.

Step 3: Gather Necessary Documents

Ensure you have all required identity, income, and property-related documents.

Step 4: Apply Online or Offline

• Online: Visit the bank’s website, fill out the application form, and upload documents.
• Offline: Visit the nearest bank branch and submit your application with documents.

Step 5: Loan Processing & Verification

The bank will verify your credit score, income stability, and renovation plans.

Step 6: Loan Approval & Disbursement

Once approved, the loan amount is either:
✔ Disbursed in a lump sum (for smaller projects)
✔ Disbursed in stages based on renovation progress

6. Tax Benefits on Home Renovation Loans

Under Section 24(b) of the Income Tax Act:

✔ You can claim tax deductions up to ₹30,000 per year on interest paid for home renovation loans.
✔ If the loan is taken for a self-occupied house, it is part of the ₹2 lakh deduction limit under home loan interest benefits.

(No tax benefit is available on principal repayment for home renovation loans.)

7. Pros & Cons of Home Renovation Loans

✅ Pros:

✔ Lower interest rates compared to personal loans
✔ Flexible repayment tenures
✔ Tax benefits on interest paid
✔ Increases home value and living comfort

❌ Cons:

✘ Requires property documents and approvals
✘ Interest rates may be higher than standard home loans
✘ Funds must be used strictly for home improvement purposes

8. Alternative Financing Options for Home Renovation

• Personal Loan for Home Renovation: Higher interest rates but faster approval
• Home Loan Top-Up: If you have an existing home loan, you can apply for a top-up loan
• Loan Against Property: Use your home as collateral for lower interest rates

9. Common Mistakes to Avoid

❌ Not Comparing Interest Rates

Always compare multiple lenders to find the best home renovation loan interest rate.

❌ Underestimating Renovation Costs

Ensure you budget for additional expenses like labor, materials, and permits.

❌ Ignoring Processing Fees & Hidden Charges

Check for processing fees, prepayment charges, and foreclosure penalties before signing the loan agreement.

Conclusion

A home renovation loan is a great way to finance repairs and upgrades while keeping interest costs lower than personal loans. By comparing home renovation loan interest rates, checking eligibility, and understanding tax benefits, you can make an informed decision.

Would you like help comparing the best home renovation loan options or calculating your loan EMI? Let me know!