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All You Need to Know About Home Improvement Loans

Blox Social
Posted on
Apr 3, 2023

Buying a home is a very emotional decision. It is a safe haven, a place to build beautiful memories with friends and family, and a place to relax and unwind. But a house, a flat, or a residential apartment is also a major financial asset that depreciates in value over time. Much of this depreciation comes from wear and tear. Timely and proper maintenance, renovation, and home improvement work can significantly help counter such wear and tear. Remodelling and improvement projects can also help give your home an aesthetic boost that keeps your home both beautiful and comfortable. However, renovation, restoration, and remodelling work can cost a pretty penny. Fortunately, most banks and financial institutions in India offer home improvement loans to help fund these activities. Here’s all you need to know about such loans.

What are home improvement loans?

Home improvement loans are specialised loan products that are extended for home repair, renovation, and remodelling work done on a property purchased or owned by you. It can be used to renovate the house, refurbish the interiors, make structural changes, or make necessary repairs. For example, you can use the funds for tiling, painting the walls, flooring, redoing the ceilings, and getting electrical or plumbing work done. Most home improvement loans include remodelling of the house. You will need to specifically mention the changes you intend to make when you apply for the loan and are expected to complete the work within a year of loan disbursement.

Eligibility criteria 

Most banks or financial institutions offer secured home improvement loans with the property as collateral. These are offered to salaried, self-employed borrowers and professionals. You may need proof of ownership, KYC, bank statements, and income proof with your application.
In some cases, the bank or lender may offer home improvement loans after a stipulated period. For example, if you take a loan to purchase a flat, the bank or lender may deem you eligible for a home improvement loan 15 years after the purchase.

Different lending institutions have different eligibility criteria. Banks and housing finance companies have clearly defined eligibility criteria mentioned on their websites. Look these up before you apply, as a rejection and multiple applications could affect your credit score. In addition, it is a good idea to compare product details like interest rates, tenor, and specifications before you apply.

Home improvement loan Vs Personal loan

Most people opt for personal loans to fund several different needs. Tuition, vacations, grand weddings, medical emergencies, overdue utility bills etc., are common reasons people opt for personal loans. In addition, people opt for personal loans to fund home repairs, renovations, remodelling, or even upgrading the interiors. This is not a good idea, though. Personal loans come with short tenors and high rates of interest. Therefore, if you are eligible for a home improvement loan, it is always better to opt for one. Longer tenors and low-interest rates make for easily affordable EMIs, and these loan products also hold you accountable for using funds. Thus, home improvement loans are great for financial planning as well.

Home improvement in the mortgage period

Buying a residential property in itself is a major financial undertaking, and most of us finance this with the help of a home loan. Home loans, meant to buy a residential property, often have a long tenor running into decades. What happens when your home loan is still active, and your home requires remodelling, renovation, or repair work? In such cases, taking a top-up on your existing home loan is a good idea rather than applying for a new one. Your bank or NBFC will be glad to extend such a facility, particularly if you have had a long relationship and a stellar repayment history. Home loans have the lowest interest rates, and a top-up can be used for home improvement without the need to provide further documentation or explanation.

Tax Benefits

One of the most significant advantages of opting for a home improvement loan is that the product brings a number of tax benefits to the borrower. Under section 24 of the Income Tax Act, you can avail of a tax deduction of up to INR 30,000 per annum towards interest repayments on home improvement loans. In addition, if you have an existing home loan taken for the purchase of the property, you are eligible for an overall tax deduction of INR 2 lakhs per annum towards interest repayment. This includes INR 30,000 for the interest component of your home improvement loan.


Home improvement, maintenance and renovation keep your home comfortable and also help in boosting the value of the property. Home improvement loans are a good option when it comes to financing this work without shouldering the burden of the cost for such work.

Finance & Legal