Property Investment Loan: How to Finance Real Estate in India

When you’re buying property to rent out or flip, you’re not just buying a house—you’re buying a property investment loan, a specialized mortgage designed for purchasing real estate that generates income, not for living in. Also known as investment property loan, it works differently than a home loan for your own residence. Banks treat it as a business decision, not a personal one, so the rules are stricter. You’ll need stronger income proof, a bigger down payment, and higher credit scores. But if you get it right, this loan can turn a single property into a steady income stream.

Most lenders in India require at least 25-35% down for an investment loan, compared to 10-20% for a primary home. Why? Because if you lose your job, you’re less likely to keep paying rent on a property you don’t live in. They also check your existing debt—your total monthly payments (including this new loan) can’t exceed 50-60% of your income. And forget about using rental income from the property to qualify unless you already own another rental and have 6 months of rent history. Banks want proof you can pay even if the unit sits empty.

Some lenders offer real estate financing, a broader term covering loans, lines of credit, and private funding options for buying property. Also known as property purchase loan, this includes everything from bank mortgages to NBFCs and even peer-to-peer lending. But not all are equal. A bank loan might have lower rates but slower approval. An NBFC might approve you faster but charge 2-3% higher interest. Know the difference before you sign. And don’t assume your personal home loan terms apply here. Investment loans often have higher interest rates, shorter terms, and prepayment penalties. Some lenders even require you to hold the property for 3 years before selling.

You’ll also need to think about taxes. Rental income from your investment property is taxable. But you can deduct the loan interest, maintenance, property tax, and depreciation. That’s where many investors miss out—they don’t track expenses properly. Keep receipts. Use a separate bank account for rent and expenses. It makes filing easier and helps you prove profitability to lenders if you want to buy a second property later.

What about locations? In cities like Mumbai, Delhi, or Bengaluru, rental yields are lower but prices are higher. In tier-2 cities like Indore, Coimbatore, or Jaipur, you can get better cash flow with smaller loans. Your loan size should match the market—not your dreams. A ₹50 lakh loan in a city with ₹15,000 monthly rent won’t work if your expenses are ₹12,000. You need breathing room.

There’s no magic formula, but there are clear steps: check your credit, save your down payment, calculate your cash flow, and talk to lenders who specialize in investment loans—not just home loans. The right loan can turn your savings into assets. The wrong one can turn your savings into a burden.

Below, you’ll find real examples of how people in India are using property investment loans to build wealth—what worked, what didn’t, and what lenders actually care about when they say "yes" or "no."