Is It Possible To Get A Home Loan Without Down Payment In India?

Real estate is still a much sought after investment instrument for many Indians today. But with skyrocketing property prices in the last decade, home loans have become the necessary conduit for the majority of Indians to help them purchase their dream home.

However, a home loan alone is not enough to get you over the line. You need to have enough funds to make a down payment in order to avail of the home loan from a bank or NBFC in India.

A down payment is nothing but a percentage of the market value of the property that has to be paid to the developer in order to seal the deal. This moves the paperwork through, and you can go ahead and approach a home loan provider like SMFG Grihashakti by Fullerton India to finance the rest of it.

Can You Get a Home Loan with No Down Payment?

For lower and middle class Indians, getting the funds to make a down payment on the home loan is a huge impediment. Needless to say, the thought process for many prospective homeowners is to look for ways to get a home loan at zero down payment at all?

The simple answer to that is a ‘no’.

According to the Reserve Bank of India guidelines, you cannot avail the entire purchase amount of the property as a home loan from a lending partner. Banks and NBFCs can only sanction up to a certain percentage of the market value of the property in the form of a home loan. The percentage of the minimum down payment for a home loan is 10% of the market value of the property depending on your chosen lending partner.

How Can You Arrange Funds for A Down Payment on Your Home Loan?

Owning your dream home is a major life goal. Since 0 down payment home loans are not really in the equation, you need to invest time in some smart financial planning to have that down payment amount ready and saved to enable the purchase of your dream property at any given point in time.

Obviously, that cannot happen overnight. However, if you have already found that dream property and you wish to make it yours right away but do not have access to funds that can help you make the down payment commitment on it, then you have to think of alternative avenues to arrange for finance.

Here’s what you can do.

1. Take an Unsecured Loan:

Not having funds to pay the down payment on your home loan should not be the reason behind you not getting to purchase your dream property. The easiest way to overcome this challenge is to take out an unsecured loan.

The simple form of unsecured finance is via personal loans. A lot of lenders these days offer hassle-free and online applications of personal loans. Just make sure that you have a 750+ credit score, no past loan repayment defaults and meet their basic eligibility parameters. The personal loan should be approved, and the funds disbursed to your account in 3 business days. Please note however:

• If you have already taken a home loan, a personal loan in addition to the home loan may be difficult to get. Use a personal loan eligibility calculator to get an estimate of the maximum personal loan amount you may be able to get factoring in your home loan EMIs.
• Personal loans have a repayment tenure of 12 to 60 months. This means that your EMI burden will increase if you take one in addition to your home loan.
• Personal loans are unsecured. Assuming you already have a home loan, even if you get approved for one, you may get it at extremely high rates.
• Adding a close family member with an excellent credit score and stable income as a co-applicant on your personal loan may help you get the down payment amount you need at favorable terms.

2. Sign Up for The Pradhan Mantri Awas Yojana Scheme:

More and more citizens in India can now own a home under the government backed Pradhan Mantri Awas Yojna or PMAY scheme. The scheme enables people residing in both rural and urban areas in the country to buy a home.

Under this scheme, the beneficiary can get up to a 6.5% subsidy on the interest rate on the home. That said, the actual percentage of subsidy will be determined based on the beneficiary’s income bracket. The scheme is applicable only if you do not own a brick home anywhere in India and belong to the Economically Weaker Section (EWS) with an annual household income of less than Rs. 3 lakhs, the Low-Income Group (LIG) with a yearly household income between Rs. 3 lakhs and 6 lakhs and Middle-Income Groups (MIG) (I) and (II) with an annual household income between Rs. 6 lakhs and Rs. 18 lakhs.

If you do qualify for the scheme, you will be required to avail home loan at a low down payment.

Please note that this scheme is only available to individuals belonging to EWS and LIG categories until March 31, 2022.

3. Pull Up Funds from Your Investments:

If you have been planning to purchase a home for a while, then having an investment portfolio in place certainly helps. You can always take a loan from your PPF account if you have been operating it for over 5 years or more. Alternatively, if you have instruments such as fixed deposits, whole life insurance policies, shares and stocks, then you can always pledge them as collateral to secure a low interest loan.

If you cannot find a lender to sanction a loan at such short notice, you can also encash them early to get the funding. However, you will lose out on the overall value of the investment if you encash them prior to their maturity date.

4. Taking A Loan from Your Organisation:

A number of companies today allow employees to request short term loans. The loan amount generally does not exceed a total of one month’s salary. Other factors such as tenure of employment with the organisation, general relationship with your immediate supervisor and the HR department may come into play when it comes to getting the loan approved.

That said, this form of loan does not require any documentation and is instantly processed in most cases.

5. Ask Your Friends or Relatives for Financing:

If you do not wish to pursue formal avenues of availing funds to make your down payment, you may consider asking your near and dear ones to lend a helping hand. The best part about asking your family and friends to fund the down payment is that it is a completely interest free form of finance.

You simply repay back what you borrow. Moreover, if you miss a payment, there are no penalty fees or collection calls to worry about.

6. Choose a less expensive property

Select a property that costs less, so that the resulting downpayment you need to pay would be affordable.

Points to Consider for Zero Down Payment Options

It is not possible to avoid down payment in India because the RBI requires all lending institutions to put a limit of 90% on all home loans that they give out. Do consider the following points for your down payment.

• Don’t take another loan: Many consider taking up a personal loan to cover for the remaining aspect of the home loan. Such multiple loans will only add up to your financial burden.
• Avoid borrowing from relatives: Borrowing money from relatives can mean that you get the required funding at no interest rate. However, in case you fail to repay the amount, it can lead to relationship destruction.
• Refrain from taking up secured loans: If you apply for a secured loan (with collateral), then you are putting valuable assets like your gold, vehicle, or equipment at risk. 

In Conclusion

Having your funds to pay the down payment on your home loan takes you one step closer to owning that dream property. To discuss your home loan needs, contact a representative of SMFG Grihashakti today.

Avail the benefits on offer with various home loan products and do not forget to evaluate your personalized offer with SMFG Grihashakti today.