Home Loan Types

Loans & Credit

Indian banks offer several home loan variants: regular home purchase loan, construction loan, plot + construction, home improvement loan, and balance transfer. Each has different disbursal, tax treatment, and eligibility. Understanding the type ensures you get the right product.

In detail

Home loan types:n1. Home purchase: most common. Loan for buying ready or under-construction flat/house.n2. Plot loan: for buying residential plot. Interest rate slightly higher. No Section 24 deduction until construction complete.n3. Construction loan: for building on owned plot. Disbursed in tranches as construction progresses.n4. Home improvement/renovation: for repairs, extension, waterproofing. Lower loan amount.n5. Balance transfer: moving existing home loan from one bank to another at better rate.n6. Top-up loan: additional loan over existing home loan (up to property value). Can use for any purpose.nnNRI home loan: available for NRI/PIO, repayment must be from NRE/NRO account.

Real-life example

🇮🇳 India example

Suresh bought a plot in 2018 (plot loan at 9.5%). In 2022 he builds on it (switches to construction-cum-home loan at 8.7%). On completion, loan converts to regular home loan. Only after completion can he claim Section 24 interest deduction. Pre-construction interest can be claimed in 5 equal installments post-completion.

Frequently asked questions

Can I take a plot loan and then a construction loan later? ▼

Yes. Many banks offer combo plot + construction loans, or you can take them separately. Get the construction loan from the same lender as your plot loan to simplify documentation. Interest during construction (pre-EMI interest) can be claimed in 5 equal parts over the first 5 years post-construction under Section 24.