How to Save for a House Down Payment: A Plain English Plan

Most people saving for a first home are saving towards the wrong number.

They pick a deposit percentage, usually 10% or 20%, multiply it by the price, and start transferring money every month towards that figure. Then registration day arrives and the cash actually required turns out to be a good deal larger, because two rules nobody mentioned have been quietly setting the real number all along.

Why is the deposit never the whole bill?

In India the minimum deposit is set by the Reserve Bank of India, not by the buyer or the lender. RBI caps the loan-to-value ratio, which is the share of a property's value a lender may advance, in three bands:

Loan amount	Maximum the lender may advance
Up to Rs 30 lakh	90% of value
Above Rs 30 lakh and up to Rs 75 lakh	80% of value
Above Rs 75 lakh	75% of value

There is a catch inside that table which trips up almost everyone reading it. The bands are defined by the size of the loan, not the price of the home. So a 90% loan is only available while 90% of the price still fits under Rs 30 lakh, which stops being true at a price of about Rs 33,33,000. Above that, the best available drops to 80%, and that band runs out at a price of about Rs 93,75,000.

The practical effect is that "I will put 10% down" is a plan that only works on homes below roughly Rs 33 lakh. Everyone else is putting down 20% or 25% whether they intended to or not.

The second rule is smaller in wording and larger in cash. RBI's Directions exclude stamp duty, registration and documentation charges from the property value used to compute the permitted advance, so that the effectiveness of the LTV norms is not diluted. In plain terms, those charges cannot be borrowed. They are cash, on the day, on top of the deposit.

What does a Rs 60 lakh flat actually cost in cash?

Take a Rs 60,00,000 flat in Maharashtra.

Ninety per cent of the price is Rs 54,00,000, which is above the Rs 30 lakh ceiling, so that band is out. Eighty per cent is Rs 48,00,000, which sits inside the Rs 30 lakh to Rs 75 lakh band, so that is the loan. The deposit is Rs 12,00,000.

Stamp duty at 5% adds Rs 3,00,000. Registration at 1% adds Rs 60,000.

Total cash needed: Rs 15,60,000, which is 26% of the price.

A buyer who planned around a 10% deposit had Rs 6,00,000 in mind. The gap is Rs 9,60,000, and it is discovered late, because nothing in the shopping process forces the arithmetic to happen early.

Does the share stay the same as prices rise?

No, the cash requirement grows as a share of the price, not just in absolute terms. Each step up through the LTV bands raises the deposit percentage, while stamp duty stays proportional. The two stack.

Price	Loan permitted	Deposit	Stamp duty at 5%	Registration at 1%	Cash needed	As a share of price
Rs 30,00,000	Rs 27,00,000	Rs 3,00,000	Rs 1,50,000	Rs 30,000	Rs 4,80,000	16%
Rs 60,00,000	Rs 48,00,000	Rs 12,00,000	Rs 3,00,000	Rs 60,000	Rs 15,60,000	26%
Rs 1,00,00,000	Rs 75,00,000	Rs 25,00,000	Rs 5,00,000	Rs 1,00,000	Rs 31,00,000	31%

Doubling the price from Rs 30 lakh to Rs 60 lakh does not double the cash needed. It more than triples it, from Rs 4,80,000 to Rs 15,60,000.

That is the single most useful thing to know before choosing a target, because it means stretching to a more expensive home costs far more up front than the price difference suggests. The home loan EMI calculator applies these bands automatically and totals the cash for any price.

How much is stamp duty where you live?

Stamp duty is a state tax, so the same flat at the same price costs different amounts in different places.

State	Stamp duty on a sale deed	Registration fee
Maharashtra	5% inside municipal corporation limits, 4% in a gram panchayat area, with 1 percentage point off for women buyers	1%, capped at Rs 30,000
Karnataka	5%, plus an additional 10% of that duty as an infrastructure surcharge under section 3B	Revised upward with effect from 31 August 2025
Delhi	6% for a male buyer, 4% for a female buyer, inclusive of transfer duty	1% plus Rs 100 pasting charge
Tamil Nadu	7% on market value	2% on market value

On the Rs 60,00,000 flat, that is Rs 2,40,000 in Delhi if the buyer is a woman, against Rs 5,40,000 in Tamil Nadu including registration. Same flat, same price, Rs 3,00,000 apart on tax alone.

Two of these states reduce the rate for women buyers, which is worth knowing before deciding whose name the deed goes into. Maharashtra's reduction came through an order dated 31 March 2021 and takes the rate to 4%. Delhi's concession is built into the headline rate.

Where should the money sit while it builds?

A deposit fund has one job, which is to still be there in full on the day it is needed. That rules out anything whose value can fall, however good the long-run case for it.

For a target one to three years away, a fixed deposit or a recurring deposit does the work in India, and a high-yield savings account does it in the US. Indian bank FDs currently run around 6.5% to 7.5% depending on tenure and bank, and leading US high-yield savings accounts sit near 4%. A recurring deposit suits this goal particularly well, because it takes a fixed monthly amount and matches the way most people actually save.

For three to five years out, the answer barely changes. Some households ladder FDs so a portion matures each year, which keeps a little more of the money earning the longer-tenure rate without locking all of it past the buying date.

Equity funds are the tempting mistake here. Over twenty years the case for them is strong. Over the three years before you buy a house, a fall of 30% in the months before registration does not average out, it simply resets the plan. The savings goal calculator will work out either the monthly amount or the timeline in rupees or dollars.

What also does not work: leaving it in a current or checking account, where it earns nothing and gets spent; or locking it into a deposit that matures after the date you want to buy, where breaking it early costs a penalty.

How the US version of this differs

American buyers face a looser version of the same structure. There is no central-bank cap on loan-to-value, so mortgage insurance supplies the constraint that regulation supplies in India.

The 20% benchmark exists because conventional lenders waive private mortgage insurance above it. Below 20%, PMI adds roughly 0.3% to 1.5% of the loan amount a year. Several programmes go far lower: conventional loans from 3% with PMI, FHA loans from 3.5% with credit scores of 580 and above, and VA loans for eligible veterans and serving members with nothing down and no PMI at all, though a funding fee applies. USDA loans cover eligible rural areas with no deposit.

Closing costs play the role stamp duty plays in India, typically 2% to 5% of the price, and like stamp duty they have to be paid in cash. State housing finance agencies and the Consumer Financial Protection Bureau's homebuyer toolkit are the standard places to check what assistance is available.

The trade-off is real in both directions. On a $400,000 home at 6.5% over 30 years, going in with 5% down where another buyer puts 20% costs roughly $77,000 more in interest plus about $20,000 in PMI, and buys the household three years earlier, avoiding three years of rent and starting equity sooner. Which side wins depends on how fast rent is rising locally.

What else the budget has to carry

The deposit and the duty are the large items, not the only ones. Registration day itself brings legal fees for title verification, and most buyers pay a processing fee to the lender, commonly 0.25% to 1% of the loan with GST on top.

Moving costs follow, then the things a new home turns out to need in its first six months: fittings, a water purifier, curtains, whatever the previous owner took with them.

Then the running reserve. A rule of thumb is 1% of the home's value a year for maintenance, which on a Rs 60,00,000 flat is Rs 60,000 a year going forward, alongside society maintenance charges and property tax.

None of this is a reason not to buy. It is a reason to know the real number before setting the monthly transfer, because a plan built on 10% of the price will come up short by several lakh at the worst possible moment.

What this post deliberately does not cover

It does not say whether buying is the right decision. That comparison depends on rent, holding period and how fast prices grow where you live, and rent versus buy works through the arithmetic and what the official house price indices actually recorded.

It also does not recommend a particular bank, deposit or mortgage programme. Rates change, terms differ by borrower, and eligibility for anything mentioned here is a question for the lender. Anything touching the tax treatment of a purchase is a question for a chartered accountant, and anything touching where to invest is one for a SEBI-registered investment adviser.

If the flat is still under construction, pre-EMI against full EMI covers what the wait costs before possession. And the emergency fund stays separate from all of this, for the reason given above.

Frequently asked questions

How much down payment is needed for a house in India?

At least 10%, 20% or 25% of the price depending on how large the loan is, because the Reserve Bank of India caps the loan-to-value ratio at 90% for loans up to Rs 30 lakh, 80% for loans between Rs 30 lakh and Rs 75 lakh, and 75% above Rs 75 lakh. Since the cap is set by the size of the loan rather than the price of the home, the 90% band runs out at a price of about Rs 33,33,000 and the 80% band at about Rs 93,75,000. On top of the deposit, stamp duty and registration have to be paid in cash, which takes the real requirement on a Rs 60 lakh flat in Maharashtra to Rs 15,60,000.

Can stamp duty and registration be included in a home loan?

No. The Reserve Bank of India's Directions on loan-to-value ratios exclude stamp duty, registration charges and other documentation charges from the value of the property used to work out how much a lender may advance, so that the effectiveness of the LTV norms is not diluted. Those charges are therefore cash on the day of registration, on top of the deposit. On a Rs 60 lakh flat they run from Rs 2,40,000 in Delhi for a woman buyer to Rs 5,40,000 in Tamil Nadu.

Where should down payment savings be kept?

Somewhere the principal cannot fall before you need it, which in practice means a fixed deposit, a recurring deposit or a high-interest savings account in India, and a high-yield savings account, CD ladder or Treasury bills in the US. The job of a deposit fund is preservation, not growth. Equity funds are a poor fit even on a five year horizon, because a market fall in the months before you buy resets the timeline just when the money is needed.

Should the emergency fund be used for a down payment?

No. They are two separate pots doing two different jobs. Spending the emergency fund at closing leaves a household with a new home, a new EMI, and nothing to absorb a job loss or a medical bill, at exactly the point its fixed costs have gone up. Lenders also expect to see reserves that are not part of the deposit when they underwrite.

How long does saving a house down payment take?

It depends on the target and the monthly amount, and the arithmetic is worth doing before anything else. Saving Rs 10,000 a month towards Rs 15,60,000 takes 156 months with no interest and 114 months in a deposit paying 6.5%. At Rs 25,000 a month it falls to 63 months without interest and 54 months with it. Doubling the monthly amount more than halves the timeline, because a larger balance earns more and the saver finishes before the longest stretch of compounding can do its work.

Sources

• Reserve Bank of India, Master Directions on housing finance, setting maximum loan-to-value ratios of 90% for loans up to Rs 30 lakh, 80% above Rs 30 lakh and up to Rs 75 lakh, and 75% above Rs 75 lakh, and excluding stamp duty, registration and other documentation charges from the property value used to compute the permitted advance
• Revenue Department, Government of NCT of Delhi, property registration charges: stamp duty and transfer duty at 6% for a male buyer and 4% for a female buyer, registration fee 1% plus Rs 100 pasting charge
• Department of Registration and Stamps, Government of Maharashtra, Maharashtra Stamp Act Schedule I, Article 25(b): 5% within municipal corporation limits and 4% in a gram panchayat area, with the 1 percentage point reduction for women buyers under the order dated 31 March 2021
• Department of Stamps and Registration, Government of Karnataka, Karnataka Stamp Act 1957, Schedule Article 20(1) at five per cent of the value, and section 3B additional duty at ten per cent of the duty chargeable
• Registration Department, Government of Tamil Nadu, Duty and Fees table on the TNREGINET portal: Conveyance (Sale) at 7% stamp duty and 2% registration fee on market value
• Consumer Financial Protection Bureau, Owning a Home homebuyer toolkit, for US closing costs and assistance programmes