Renovating your house? Plan ahead, start with a strategy to avoid overspending
Similarly, Pooja, a homemaker, and her husband Vinay Khanna, a merchant navy officer, realised their newly purchased flat needed a makeover to match their contemporary lifestyle. The previous owner had already renovated the bathrooms, leaving the couple to focus on revamping other areas. With a contractor recommended by friends, they culled out Rs.15 lakh from their savings over two months to transform the space. “We wanted a temple area, so we partitioned part of the living room to make that possible, and packed the kitchen with the latest gadgets,” Pooja says.
Stories like these reflect a growing trend. According to Deloitte India’s report, ‘Unlocking Opportunities in India’s Home & Household Market Thought Leadership,’ demand for home renovations is surging, especially in Tier 2/3 cities. Rising disposable incomes, easy access to credit, and the influence of digital platforms have encouraged homeowners to personalise their spaces. Younger and elderly homeowners are renovating more frequently, primarily focusing on bedrooms and living rooms, often sticking to budgets under Rs.5 lakh, the report mentions. Almost 50% respondents indicate a higher frequency of renovation within less than five years for bedrooms and living rooms versus other rooms, it adds.
The motivations behind renovations vary— from lifestyle upgrades and customisation to enhancing property value for resale or rentals. While many people typically renovate properties they are going to be living in to suit their tastes and styles, homes need to be jazzed up to raise value of rental spaces too. The logic is simple: If two houses in the same apartment complex are up for sale, the one fancier would fetch a higher rent. “Indian tenants have become choosy and won’t settle for lack-luster interiors anymore. This is all the truer in the metros and tech-driven cities,” remarks Rahul Phondge, Chief Operating Officer, Residential, ANAROCK Group.
Home improvement loans
Personal loans and home renovation loans differ on the need for collateral, interest rate and tenure.
ADHIL SHETTY
CEO, BANKBAZAAR
Note: “Select your loan based on how much funding you need, the assets you can pledge, and the most favourable interest rate available. It is about understanding your financial limitations, the criticality of upgrades needed, and finding the sweet spot.”
Uptick in trends
Observing the trend over the past few years, Ajay Mehta of Delhi-based Architechnics notes that the pandemic made people more mindful of their living spaces, especially with the rise of work-from-home culture. “Now, with Pinterest and Instagram, many clients come with mood boards. Our role with most of such clients is to align their aspirations with practical solutions,” he says. Mehta emphasises practicality in renovations, advising homeowners to focus on durable materials and to prioritise spaces based on lifestyle needs. For instance, younger couples with children will want some work station/study areas, while retirees may have more time to entertain people, and hence may jazz up the drawing room.
“The costing depends upon how much of work is required in the area, the age of the property as well as the materials chosen. This is a matter of budgets, needs, choice and aesthetics,” says Mehta. “Kitchens and bathrooms typically consume the largest share of renovation budgets due to the combination of gadget installations and civil works required,” Mehta explains. Older homes may require extensive repairs, plumbing replacements, or plastering. Lighting, flooring, ceilings, and wall finishes can dramatically transform a space without overspending, he adds.
Agrees Shweta Jain, owner of Noida-based S.Jade Architects. “The level of customisation that you seek will have a bearing on the costs,” she says. Home renovations can look daunting. “One does not know where to begin, what to look into, dimensions, and the material choices can become challenging, so it’s always good to refer to a designer. For instance, while designing a kitchen, one needs to work around the gadgets that will be fitted in. Many times people end up redoing kitchens midway because they suddenly decide to go in for a different refrigerator or a dishwasher. Such things will add to the costs and delays,” says Jain.
Funding home makeovers
Financing these projects, that involve material costs and styling professional/contractor fees, is a key consideration. While many fund renovations through savings, there are multiple borrowing options. According to the BankBazaar Aspiration Index 2024, around 18% of people have taken a loan for home improvement or upgradation, reflecting a growing trend in personalised home enhancements.
Home equity loans, secured against property value, offer higher loan amounts at lower interest rates, and for longer tenures, of up to 15 years. Personal loans, while quicker and more flexible, come with higher interest rates and shorter tenures of one to five years. Top-up home loans provide a convenient alternative for those with existing mortgages, streamlining the documentation process. (See box)
Pooja Khanna
Noida
Note:Renovated parts of her 1,600sq ft home for Rs.15 lakh. Makeover included restyling of kitchen, living areas, windows, doors, and lighting.
Adhil Shetty, CEO of BankBazaar, advises meticulous planning to avoid budget overruns. “Home renovation projects often expand beyond initial estimates. It’s crucial to draft a clear budget, leaving a 10-15% cushion for unexpected expenses,” he says. Prioritising tasks— separating essential upgrades from luxury ones—can help manage costs effectively.
Shetty explains, “Many banks offer home improvement loans with interest rates comparable to home loans and longer tenures. If that’s not feasible, or if you already have an existing home loan and need a smaller amount, a top-up loan is a faster option since it’s just an extension of your current loan. For larger renovation needs, you could consider a loan against property, using your existing property as collateral. For smaller projects, personal loans offer quicker disbursals, though at higher interest rates.”
Putting it another way, your choice between seeking a personal loan or a home improvement loan depends on the amount you wish to borrow. Some banks give loans of up to Rs.5 crore. If you need a loan for a higher amount, then it’s better to go for a collatelarised loan. But if you seek a loan of a smaller amount, Rs.3-5 lakh or so, then a personal loan works just as well.
He cautions: “Select your loan based on how much funding you need, the assets you can pledge, and the most favourable interest rate available. It is about understanding your financial limitations, the criticality of upgrades needed, and finding the sweet spot. Just because you have access to credit does not mean you should go all out and take on expenses that you may find difficult to repay. Plan ahead and use a mix of savings and loans to finance renovations, rather than relying solely on borrowed funds. This strategy keeps costs in check.”
Atul Monga, CEO & Co-Founder of BASIC Home Loan agrees, and warns that “one major risk is overcapitalisation”, or spending more on renovations than the property’s value justifies. Home improvement loans also take longer to process, as lenders need to evaluate property value, credit history, and repayment capacity.
Both experts emphasise the need to thoroughly compare all available loan options—each with different eligibility criteria, interest rates, and repayment terms—to find the best fit. Monga advises, “Borrow only what you truly need and can comfortably repay to avoid financial strain.”
Anubhav & Neha Garg
Noida
Note:Renovated 1,500sq ft home, for Rs.30 lakh. Makeover included restyling of kitchen, bathrooms, living areas, almirahs and lighting.
Tax benefits
If you have taken a home improvement loan, you may claim deductions on interest under Section 24(b) and reduce capital gains tax, says Amit Maheshwari, Tax Partner, AKM Global. Section 24(b) of the Income Tax Act, 1961, allows individuals to claim a deduction on interest paid for loans taken for home improvement, including repairs, renovations, or reconstruction. “The maximum deduction for such interest payments is capped at Rs.30,000 per financial year, regardless of whether the property is self-occupied, let out, or deemed to be let out. However, the combined deduction for interest on both home loans and home improvement loans cannot exceed Rs.2,00,000 annually, as per the overall limit under Section 24(b). Additionally, Section 80C offers a deduction of up to Rs.1,50,000 per year for the repayment of the principal amount of a home loan, but this benefit is limited to loans for property purchase or construction and does not apply to loans taken specifically for renovations or improvements,” says Maheshwari. If the property is sold within five years of completion, the deductions claimed under Section 80C become taxable.
Furthermore, renovation expenses can provide significant tax benefits when calculating capital gains tax, as these costs can be added to the property’s acquisition or improvement cost, effectively reducing the taxable capital gain upon sale, he says.
Whether you choose to fund renovations through savings or loans, careful planning and prioritisation are key. As the Gargs and Khannas discovered, transforming a house into a personalised haven requires balancing aspirations with practicality— and a well-planned financial strategy.
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