Saving for the down payment: the arithmetic of the 20%, stamp duty, and deposits vs gold

Rules and rates as of 18 October 2026.

"Save 20% and the bank will lend the rest" is the rule of thumb most first-time buyers hear. The arithmetic behind it is less tidy. The share a bank may lend depends on the size of the loan, stamp duty usually has to come out of your own pocket, and the flat's price can move while you save. Where you keep the money for those years changes how sure you can be of the final figure.

This explainer works through the numbers. It does not say which option to choose; that depends on your income, timeline and other goals, and a SEBI-registered investment adviser or a CA can look at your whole picture.

What the RBI caps say

The RBI limits the loan-to-value (LTV) ratio of individual housing loans from banks. The ceilings in its Master Circular on Housing Finance (RBI/2021-22/171, 18 February 2022) are:

• loans up to ₹30 lakh: up to 90% of the property's value;
• loans above ₹30 lakh and up to ₹75 lakh: up to 80%;
• loans above ₹75 lakh: up to 75%.

The same circular tells banks not to count stamp duty, registration and other documentation charges as part of the cost of the house when working out the LTV, so that the norms are not diluted. The one exception is a house costing ₹10 lakh or less, where those charges may be added.

Two cautions. These are ceilings: a bank can lend less after looking at your income and the property. And the RBI has since consolidated many of its banking instructions into new Directions; the Reserve Bank of India (Commercial Banks – Credit Facilities) Directions, 2025, are shown on its website as updated to 1 October 2026. We could not open their full text to confirm that the housing-loan LTV ceilings carried over unchanged, so the editor should confirm the current figures before you rely on them. Housing finance companies have their own RBI rules, which this piece does not cover.

How the slabs work on real prices

Because the slabs are set by the loan amount, the maximum loan is the largest figure that fits any slab: 90% of the price capped at ₹30 lakh, 80% of the price capped at ₹75 lakh, or 75% of the price. That produces some jumps:

Flat price	Maximum loan at the RBI ceiling	Effective LTV	Your share of the price
₹25 lakh	₹22.5 lakh (90%)	90%	₹2.5 lakh
₹35 lakh	₹30 lakh (90% would be ₹31.5 lakh, above the slab)	85.7%	₹5 lakh
₹50 lakh	₹40 lakh (80%)	80%	₹10 lakh
₹80 lakh	₹64 lakh (80%)	80%	₹16 lakh
₹95 lakh	₹75 lakh (80% would be ₹76 lakh, above the slab)	78.9%	₹20 lakh
₹1.2 crore	₹90 lakh (75%)	75%	₹30 lakh

So "20%" is right only in the middle band. Below ₹30 lakh of loan it can be as little as 10%; above ₹75 lakh of loan it is 25%. Stamp duty and registration come on top in every row except a house of ₹10 lakh or less.

The real target: price share plus stamp duty

Take a ₹80 lakh flat and assume stamp duty and registration together at 7% of the price. The actual rate differs by state, by the buyer (some states charge women less) and by the government's valuation of the property, so check yours.

• Your share of the price: ₹80,00,000 − ₹64,00,000 = ₹16,00,000
• Stamp duty and registration: ₹80,00,000 × 7% = ₹5,60,000
• Cash needed: ₹16,00,000 + ₹5,60,000 = ₹21,60,000, or 27% of the price

That leaves out possession charges, furnishing, the loan's processing fee and a cash buffer, which add more.

Worked example: saving ₹21.6 lakh in five years

Suppose you put away the same amount at the start of each month for 60 months. The amount a monthly saving M grows to is:

Final amount = M × [((1 + r)^60 − 1) ÷ r] × (1 + r), where r is the monthly rate of return.

Every rate below is an assumption chosen to show the arithmetic, not a forecast or a quote from any bank.

• Fixed deposit or recurring deposit at an assumed 6.5% a year, compounded quarterly. The monthly equivalent is (1 + 0.065 ÷ 4)^(1/3) − 1 = 0.539%. To reach ₹21,60,000 you would need about ₹30,426 a month before tax.
• The same deposit after tax. Interest is taxable each year at your slab rate. At an assumed 30% slab, the 6.5% becomes roughly 4.55% after tax (6.5% × 0.70, ignoring cess). The monthly saving needed rises to about ₹32,021; ₹32,000 a month reaches ₹21,58,576.
• Keeping it in a savings account at 0%. ₹21,60,000 ÷ 60 = ₹36,000 a month.

Now put the same ₹32,000 a month into gold, whose price has no fixed return, and see how the final amount depends on what the price does, especially near the end:

Path over five years (assumed)	Final amount from ₹32,000 a month	Against the ₹21.6 lakh target
Deposit at 4.55% after tax	₹21,58,576	₹1,424 short
Gold rises 8% a year throughout	₹23,49,247	₹1,89,247 over
Gold rises 8% a year for four years, then falls 15% over the fifth	₹18,85,806	₹2,74,194 short
Gold ends where it started	₹19,20,000	₹2,40,000 short

The gold rows are before tax, buying and selling spreads, making charges or fund expenses, all of which lower the final figure. The point of the table is the spread of outcomes: a deposit's final amount is known on the day you start, while gold's depends on the price in the month you need the cash.

The target moves too

If the flat's price rises an assumed 5% a year while you save, the ₹80 lakh flat costs ₹80,00,000 × 1.05^5 = ₹1,02,10,253 after five years. The loan then crosses ₹75 lakh, so the 75% slab applies: the maximum loan is ₹76,57,689, your share of the price is ₹25,52,563, and 7% stamp duty adds ₹7,14,718. The cash needed becomes about ₹32,67,281, and the deposit route at 4.55% after tax would need about ₹48,436 a month instead of ₹32,021. If prices are flat, the original target holds. Nobody can tell you in advance which happens.

How safe is money parked in a bank deposit

Deposit insurance from the Deposit Insurance and Credit Guarantee Corporation (DICGC) covers each depositor in a bank up to ₹5,00,000, for principal and interest together, and it covers fixed deposits. A down-payment fund above ₹5 lakh in one bank is not fully insured. Spreading it across banks changes that arithmetic; the DICGC's FAQs explain how accounts held in different names and capacities are counted.