Affordable Housing vs Regular Home Loan – Pros and Cons

If you are buying a home for the first time, choosing between an Affordable Housing Loan and a regular Home Loan can be confusing. Both come with different advantages depending on your income, property value and goals.

This guide will help you compare the two options and decide what suits your needs best.

What Is an Affordable Housing Loan

An Affordable Housing Loan is designed to support first-time homebuyers from EWS, LIG or MIG segments. These loans are backed by government schemes such as the Pradhan Mantri Awas Yojana (PMAY) and come with:

• Interest subsidies ranging from 6.5% to 8% per annum
• Property value and carpet area restrictions
• Income-based eligibility (₹3 lakh to ₹18 lakh per annum)
• Maximum tenure of 20 years
• Special emphasis on women co-ownership

Also Read: Affordable Housing Loan: Everything You Need to Know

What Is a Regular Home Loan

A regular Home Loan is a standard offering by banks and NBFCs for any eligible individual. It does not require income group classification or government subsidy eligibility.

Key features include:

• No income slab or property size limitations
• Higher loan eligibility, depending on credit score and income
• Longer repayment tenures, often up to 30 years
• Suitable for all types of properties, including luxury and resale

Also Read: Home Loan: All You Need to Know

Key Differences Between the Two

Eligibility

• Affordable Housing Loan are based on income groups like EWS, LIG or MIG
• Regular Home Loan are based on overall creditworthiness, not income category

Interest Subsidy

• Available on Affordable Housing Loan through PMAY
• Not available on regular Home Loan

Property Restrictions

• Affordable Housing Loan has property size and carpet area limits
• Regular Home Loan has no restrictions on property size or type

Tenure

• Affordable Housing Loan usually offers tenure up to 20 years
• Regular Home Loan can offer tenure up to 30 years

Purpose

• Affordable Housing Loan is meant only for first-time home purchases
• Regular Home Loan can be used for purchase, renovation or even a second home

When Should You Choose Which

Choose an Affordable Housing Loan if:

• You are a first-time homebuyer
• Your annual income falls within ₹3 lakh to ₹18 lakh
• You want to reduce EMI burden using PMAY subsidy
• You are buying a home in a small city or affordable township
• You meet the required carpet area and loan size conditions

Choose a regular home loan if:

• You are buying a second home or luxury property
• You need a higher loan amount
• You prefer longer repayment terms
• You are not eligible under government subsidy schemes

Final Thoughts

There is no one-size-fits-all solution when it comes to Home Loan. Affordable Housing Loan helps first-time buyers reduce their interest burden and own a home faster. Regular Home Loan offers greater flexibility for buyers who need larger loans or are purchasing beyond subsidy limits.

Explore both options with a trusted lender such as Godrej Capital to make an informed and confident decision.

Apply now for a Home Loan.

FAQs

Q.1. Can I convert a regular Home Loan to an Affordable Housing Loan?

A. Only if you meet PMAY eligibility criteria and apply through a registered lender.

Q.2. Do both loan types offer tax benefits?

A. Yes. Both allow tax deductions on principal and interest under Sections 80C and 24(b).

Q.3. Is prepayment allowed in both types?

A. Yes. Most lenders allow partial or full prepayment without penalty.

Q.4. Which loan is faster to approve?

A. Regular Home Loan may be quicker due to fewer government-related checks.

Q.5. Can I apply for an affordable loan if I already own property?

A. No. PMAY benefits are limited to first-time homebuyers only.

Disclaimer:

The contents of this article are for information purposes only and not a financial advisory. The information is subject to update, revision, and amendment and may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Godrej Capital or its Affiliates to any requirements. Godrej Capital or its Affiliates shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any decisions, financial or otherwise based on the contents and information mentioned. For more information, please visit www.godrejcapital.com