Home loan eligibility and EMI in India: the formula

The EMI formula

For a reducing-balance loan repaid in equal monthly instalments:

EMI = P × r × (1 + r)^n ÷ [(1 + r)^n − 1]

where P is the loan amount, r is the monthly rate (annual rate ÷ 12 ÷ 100) and n is the number of monthly instalments. The same formula, solved the other way round, gives the loan you can carry for an EMI you can afford: P = EMI × [(1 + r)^n − 1] ÷ [r × (1 + r)^n].

The formula assumes the rate does not change. On a floating-rate loan it does (see below), so the EMI or the tenor will move when the rate moves.

A worked calculation

This is a calculation, not a quotation. The loan amount and tenor are inputs that you replace with your own; the rate is the RBI’s sector-wise weighted average lending rate for fresh housing loans of scheduled commercial banks in August 2026 (7.61%, provisional, Table 9 of the RBI data file; the average for all sectors was 8.61%).

With the same loan and tenor, a rate 25 basis points higher (7.86%) gives an EMI of about ₹41,387, that is about ₹771 more a month. Use the home loan calculator for your own figures.

What lenders look at

The RBI and NHB regulate lenders, but the credit decision is the lender’s. In practice you should expect to be asked for:

• proof of identity, address and income, and the bank statements the lender specifies;
• the property documents (the agreement, the title papers and the approvals for the project);
• your existing monthly obligations, because the lender compares them with your income before fixing the loan.

We did not find an official ratio (often called FOIR, fixed obligations to income ratio) set by the RBI in the texts we could read, so treat any percentage quoted to you as the lender’s policy and ask for it in writing. The same applies to the maximum tenor and to age limits: they are set by each lender.

Fixed or floating, and how the rate moves

Under the RBI Directions on interest rates on advances for commercial banks (28 November 2025), floating-rate personal and retail loans, housing loans included, must be linked to an external benchmark: the RBI repo rate or a Treasury Bill yield published by FBIL. The Directions say the rate “shall be reset at least once in three months” and that the benchmark forms part of the loan contract. The bank may change its spread over the benchmark for the credit risk premium only when your credit assessment changes substantially, and other spread components “could be altered once in three years”. The page also notes that the Directions do not give the borrower a specific right to convert to a fixed rate at reset. For what this means for your rate, read repo rate and home loan rates.

Schemes that change the calculation

If your household income is up to ₹9 lakh a year and the property and loan are within the limits of the interest subsidy scheme, the subsidy is deducted from your principal and you pay the EMI on the reduced balance. See PMAY-Urban 2.0. Tax relief on the interest and principal is separate: see home loan tax benefits.

Which professional to consult

A home loan lender (a bank or housing finance company regulated by the RBI) for the sanction terms; a property lawyer (an advocate enrolled with the State Bar Council) for the loan agreement and the title; a registered valuer if the lender or you need an independent valuation.