Most first-home buyers know they need a down payment. Fewer know that it is only one part of the cash they will need. Here is the full picture.
Why the bank will not lend it all
RBI caps how much of a home's value a bank can lend. The rest is called your own contribution:
- Home up to ₹30 lakh: you pay at least 10%
- ₹30 lakh to ₹75 lakh: at least 20%
- Above ₹75 lakh: at least 25%
Example: for a home costing ₹70 lakh, the bank can lend up to ₹56 lakh. You need at least ₹14 lakh of your own for the price alone.
Costs the loan usually does not cover
For homes above ₹10 lakh, RBI rules say stamp duty and registration charges should not be counted in the cost when working out the loan. So you pay these yourself. Other common costs include:
- Legal and loan processing fees
- Advance maintenance and corpus fund
- Utility connection charges, if separate
- Furniture, fittings and moving costs
Show where your money came from
Banks ask for proof of your own contribution, such as bank statements. Gifts from family are common, but keep a clear record. Large cash payments should be avoided.
Buying under construction: when the cash is due
You do not pay everything on day one. A booking amount comes first. Under RERA, a builder cannot take more than 10% as an advance before a registered agreement for sale. After that, your share is often paid early in the schedule, before the bank releases its part.
Is the booking amount refundable?
It depends on your agreement. Read the cancellation clause before you pay, so you know what you would get back.
Build your plan from the cost sheet
Ask the builder for an itemised cost sheet and a payment schedule. Put each payment against a month. That is your real cash plan.
Keep a buffer
Keep a few months of expenses aside even after paying everything. Moving into a new home always has surprise costs.
A full cash plan for a ₹70 lakh home
Here is one illustrative budget, step by step. The rates below are assumptions for the arithmetic. Check the current stamp duty, registration fee and GST rate with your lawyer before you plan.
| Item | Illustrative amount |
|---|---|
| Home price | ₹70,00,000 |
| Maximum loan at 80% | ₹56,00,000 |
| Your share of the price (20%) | ₹14,00,000 |
| Stamp duty (assumed 5.6%) | ₹3,92,000 |
| Registration (assumed 1%) | ₹70,000 |
| GST, if under construction (assumed 5%) | ₹3,50,000 |
| Legal and processing fees (assumed) | ₹50,000 |
| Maintenance deposit and corpus (assumed) | ₹1,00,000 |
| Buffer for moving and surprises | ₹3,00,000 |
| Total cash you may need | ₹26,62,000 |
The first surprise is clear: the cash you need is almost double the 20% figure people talk about. Ask your bank whether it counts GST as part of the cost it lends against. Until it confirms, plan to pay GST from your own pocket.
Watch the ₹75 lakh line
RBI's limits change at ₹75 lakh. A home at ₹75 lakh needs at least 20% from you, which is ₹15 lakh. A home at ₹76 lakh needs at least 25%, which is ₹19 lakh. One lakh more on the price means ₹4 lakh more from your savings. If you are close to that line, check which side of it the total cost used by your bank falls on.
How long will it take to save?
Simple division helps. To save ₹12 lakh in 24 months, you need to put aside ₹50,000 a month. Over 36 months, it is about ₹33,333 a month. If neither is possible, a smaller budget or a longer timeline is a better answer than an over-stretched loan.
Does a bigger down payment help?
Every lakh you do not borrow is a lakh you do not pay interest on. At an illustrative 8.5% interest over 20 years, each ₹1 lakh borrowed costs about ₹868 a month in EMI. So putting ₹5 lakh more down cuts the EMI by about ₹4,340 a month. But do not empty your emergency fund to do it. A lower EMI does not help if a job change leaves you with no cash at all.
Common mistakes
- Planning only for the 20% and forgetting stamp duty and registration.
- Moving money around in cash, which leaves no trail for the bank.
- Breaking every investment, leaving no buffer after handover.
- Not checking the cancellation clause before paying the booking amount.
- Assuming the bank will release its share before your own share is paid.
Your step-by-step checklist
- Get a written, itemised cost sheet for the exact unit.
- Work out your own share using RBI's bands for that price.
- Add stamp duty, registration, GST and fees at current rates.
- Add a buffer of a few months' expenses.
- Map each payment to a month using the builder's schedule.
- Get a loan sanction letter before you pay beyond the booking amount.
Renting while you save: a fair comparison
Many first-home buyers ask whether to keep renting a little longer and save more. Here is a simple way to think about it, with illustrative numbers. Say your rent is ₹22,000 a month. Waiting one more year costs ₹2.64 lakh in rent. If, in that year, you save an extra ₹6 lakh for the down payment, you borrow ₹6 lakh less. At 8.5% over 20 years, that cuts your EMI by about ₹5,200 a month for the whole loan. Neither choice is always right. What matters is that you compare the two numbers rather than guess.
Where the money should sit until you pay
- Keep down payment savings somewhere safe and easy to withdraw, such as a savings account or a fixed deposit you can break.
- Avoid putting money you need within a year into investments whose value can fall sharply.
- Keep each transfer to the builder from an account in your own name, so the bank sees one clear trail.
- If family is helping, ask them to transfer to your account first, with a short gift letter, before you pay the builder.
New to all this? Our first home guide walks you through every step, from saving to registration.
