The smartest ways to fund home renovations in India are a dedicated renovation savings plan, a home improvement loan, a top-up on an existing home loan, government subsidies such as the rooftop solar scheme, and extra income from renting out space. Personal loans and credit card EMIs work too, but they cost more and need careful use.
A new kitchen, waterproofing before the monsoon or a fresh coat of paint can make a home more comfortable and add to its value. The challenge is paying for it without disturbing your emergency fund. Here are practical options, with what to check before you choose.
- Funding options compared
- 1. Start a renovation fund
- 2. Take a home improvement loan
- 3. Use a top-up on your home loan
- 4. Claim the tax benefit on renovation loans
- 5. Use government subsidies for green upgrades
- 6. Rent out a spare room or floor
- 7. Earn extra through side work
- 8. Personal loans and card EMIs, with care
- Tips to keep costs under control
- Frequently asked questions
Funding options compared
| Option | Best for | Watch out for |
|---|---|---|
| Savings plan or recurring deposit | Planned, non-urgent work | Takes time to build |
| Home improvement loan | Large repairs and upgrades | Paperwork, property as security |
| Top-up home loan | Existing home loan borrowers | Longer total repayment |
| Rooftop solar subsidy | Solar panels on independent homes | Eligibility and approved vendors |
| Personal loan or card EMI | Small, urgent jobs | Higher interest, hidden fees |
| Renting out space | Homes with a spare room | Agreements, tenant verification, tax |
1. Start a renovation fund
If the work is not urgent, saving for it is the cheapest route because you pay no interest. Estimate the cost with two or three contractor quotes, add 10 to 15 percent for surprises, and divide the total by the number of months you can wait.
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A recurring deposit or a separate savings account keeps the money away from daily spending. Many families also plan renovations around festival bonuses or annual increments.
2. Take a home improvement loan
Most banks and housing finance companies offer home improvement or renovation loans for work such as repairs, flooring, plumbing, painting and waterproofing. These loans usually charge less interest than personal loans because the property is used as security.
Lenders typically ask for a cost estimate from a contractor or architect, property papers and income proof. Compare the interest rate, processing fee and prepayment charges from at least three lenders before you sign.
3. Use a top-up on your home loan
If you already have a home loan with a good repayment record, your lender may offer a top-up loan. This is extra money added to your existing loan, often at a rate close to the home loan rate.
The catch is that it increases your total debt and may stretch your repayment period. Use it for work that adds lasting value, not for decor that will need replacing in a few years.
4. Claim the tax benefit on renovation loans
According to the Income Tax Department, under the old tax regime you can deduct interest paid on a loan taken for repairs or renovation of a self-occupied house up to Rs 30,000 a year. This sits within the overall Rs 2 lakh limit on home loan interest for a self-occupied property.
This benefit is not available for self-occupied homes under the new tax regime. Since the Income-tax Act, 2025 came into force on 1 April 2026, check the current rules with a tax adviser before you count on any deduction.
5. Use government subsidies for green upgrades
If your renovation includes rooftop solar, the PM Surya Ghar Muft Bijli Yojana, launched in 2024, offers a central subsidy for residential systems. The subsidy rises with system size up to 3 kW, with a maximum of Rs 78,000, according to the scheme’s official portal.
Applications are made online through the national portal, and installation must be done by a registered vendor. Lower electricity bills afterwards help the system pay for itself over time. Some state governments also offer their own top-ups, so check with your power distribution company.
6. Rent out a spare room or floor
A spare room, an unused floor or a parking space can bring in steady monthly income for your renovation fund. Always sign a written rental agreement, and complete police verification of tenants where your city requires it.
Check your housing society’s rules first, as some restrict renting. Rental income is taxable, so include it when you file your return.
7. Earn extra through side work
Freelancing, tutoring, weekend work or selling unused items online can fund smaller upgrades without any debt. Set a clear target and time limit, for example three months of tutoring to pay for new bathroom fittings, so the extra effort stays manageable.
8. Personal loans and card EMIs, with care
Personal loans are quick and need no security, but interest rates are usually much higher than on home loans. “No-cost EMI” offers on appliances can be useful, though processing fees and GST on interest may still apply.
Use these only for small amounts you can repay quickly. Missing payments hurts your credit score and makes future borrowing costlier.
Tips to keep costs under control
- Get at least three written quotes and a clear scope of work.
- Do the work in phases, starting with essentials such as waterproofing and wiring.
- Pay contractors in stages linked to completed work, not fully in advance.
- Keep all bills, as you need them for loans and tax claims.
For more money tips, visit our finance section, and for home ideas, browse lifestyle.
Frequently asked questions
Which is cheaper, a personal loan or a home improvement loan?
A home improvement loan is usually cheaper because it is secured against the property. Personal loans are faster but charge higher interest.
Can I get a tax benefit on a home renovation loan?
Under the old tax regime, interest on a repair or renovation loan for a self-occupied home is deductible up to Rs 30,000 a year, as per the Income Tax Department. Check with a tax adviser for your case.
Is there a government subsidy for home renovation?
There is no general renovation subsidy, but the PM Surya Ghar scheme gives a subsidy of up to Rs 78,000 for residential rooftop solar.
This article is general information, not financial advice. Speak to a qualified financial adviser before taking a loan.
Sources: Income Tax Department, PM Surya Ghar portal, Reserve Bank of India.
