What decides how much home you can afford
Affordability is set by two independent ceilings. Your income decides how large an EMI a lender will permit, and your savings decide how much you can put down. The property you can buy is limited by whichever runs out first.
The income ceiling
Lenders cap total EMIs at roughly 40-55% of net monthly income, counting existing loans. On ₹1.5 lakh a month at 50%, EMI capacity is ₹75,000, which supports a loan of about ₹86 lakh at 8.5% over twenty years.
Any existing EMI reduces that directly. A ₹20,000 car loan cuts the available EMI to ₹55,000 and the eligible loan to roughly ₹63 lakh — a ₹23 lakh reduction in buying power from a single obligation.
The cash ceiling
With an ₹86 lakh loan at 75% loan-to-value, the property could be about ₹1.15 crore — but that requires roughly ₹29 lakh of down payment plus another ₹7-9 lakh of stamp duty, registration, and transaction costs.
If your savings cannot cover both, the cash ceiling binds and the affordable property is smaller than your income suggests. This is the usual constraint for first-time buyers.
What lenders allow versus what you should borrow
A 50% FOIR approval does not mean half your income should go to a home loan. After the EMI, maintenance, property tax, insurance, and household expenses, little may be left for retirement savings or emergencies.
Many advisers suggest keeping housing costs — EMI plus maintenance and taxes — closer to 30-35% of net income. Borrowing at the regulatory maximum leaves no room for a rate rise, a job change, or a medical event.
How to raise your affordability honestly
Three levers work: clear existing loans before applying, add an earning co-applicant so incomes are pooled, and improve your credit score to qualify for a lower rate. Each raises the eligible amount without stretching your budget.
A longer tenure also raises eligibility, but it does so by increasing total interest rather than by making the house genuinely more affordable.
Example: ₹1.5 lakh monthly income
- Net monthly income
- ₹1,50,000
- EMI capacity at 50% FOIR
- ₹75,000
- Eligible loan at 8.5% / 20 years
- ≈ ₹86 lakh
- Property at 75% LTV
- ≈ ₹1.15 crore
- Down payment needed
- ≈ ₹29 lakh
- Plus transaction costs
- ≈ ₹7-9 lakh
The loan is affordable on paper, but the purchase needs roughly ₹36-38 lakh in cash. Whichever ceiling is lower — income or savings — is your real budget.