LTV caps explained: why your bank lends 75%, 80% or 90% of the flat's value

Rules and rates as of 18 October 2026.

You find a ₹80 lakh flat, your salary supports a ₹70 lakh loan, and the bank still sanctions only ₹64 lakh. The reason is usually not your income. It is the loan-to-value (LTV) cap, a ceiling the Reserve Bank of India sets on how much of a home's value a bank may lend.

This explainer covers where the 90%, 80% and 75% figures come from, what counts as the "value", why the RBI ties these caps to bank capital, and what changes in April 2027.

What the LTV ratio is

LTV is the loan divided by the value of the property, as a percentage. A ₹64 lakh loan on an ₹80 lakh flat is an LTV of 80%. The rest, here ₹16 lakh, is your margin or down payment.

The cap protects both sides. If prices fall or you default, the bank's cushion is your margin. A lower LTV also means you owe less than the flat is worth from day one.

The three caps, and who sets them

For banks, the caps are in the RBI's Master Circular – Housing Finance (RBI/2025-26/16, 1 April 2025), paragraph 3(a). They depend on the size of the loan, not the price of the flat:

Loan amount	Maximum LTV	Risk weight the bank applies
Up to ₹30 lakh	90%	35% up to 80% LTV; 50% above 80% and up to 90%
Above ₹30 lakh, up to ₹75 lakh	80%	35%
Above ₹75 lakh	75%	50%

These slabs date from the RBI's circular of 7 June 2017 (RBI/2016-17/317), which set them for loans sanctioned from that date. Between 16 October 2020 and 31 March 2023 the RBI temporarily used a simpler risk-weight scale for new loans, 35% up to 80% LTV and 50% above it, "irrespective of the amount" (circular of 16 October 2020, later extended). The 2025 master circular still prints the original table as the operative rule.

One caveat for the editor and the reader: in November 2025 the RBI began consolidating its bank rules into new "Directions". The Commercial Banks – Credit Risk Management Directions, 2025 (updated 1 October 2026) is the likely new home of these caps. Its text is published only as a PDF that we could not open, so we have not confirmed that the slabs above carried over word for word.

Housing finance companies and NBFCs are regulated separately by the RBI, and their LTV limits are not covered here. Ask an HFC for its own cap in writing.

What counts as "value"

The circular is specific on one point that catches many first-time buyers. Paragraph 3(b) says banks should not include stamp duty, registration and other documentation charges in the cost of the house when they work out LTV. These charges cannot be recovered if the flat is sold, so counting them would overstate the security.

There is one exception, in paragraph 3(c): if the house or dwelling unit costs ₹10 lakh or less, the bank may add stamp duty and registration to the cost. For almost every flat in a metro, that exception does not apply. You pay stamp duty from your own pocket.

A worked example: the ₹80 lakh flat

Assume an agreement value of ₹80 lakh, stamp duty at an illustrative 6% and registration of ₹30,000. Stamp duty differs by state and buyer, so check your own state's rate.

• Loan slab test: 90% of ₹80 lakh is ₹72 lakh, which is above ₹30 lakh, so the 90% slab is out. 80% of ₹80 lakh is ₹64 lakh, which falls in the ₹30 lakh to ₹75 lakh slab. Maximum loan = 0.80 × ₹80,00,000 = ₹64,00,000.
• Your margin on the flat = ₹80,00,000 − ₹64,00,000 = ₹16,00,000.
• Stamp duty = 0.06 × ₹80,00,000 = ₹4,80,000. Registration = ₹30,000.
• Cash you need = ₹16,00,000 + ₹4,80,000 + ₹30,000 = ₹21,10,000.

Measured against everything you spend (₹85,10,000), the loan covers about 75.2%, not 80%. That gap is why buyers often find themselves short at registration.

The cliffs between slabs

Because the slab is set by the loan amount, the maximum loan does not rise smoothly with the flat's price. We applied the three caps to a range of agreement values (stamp duty excluded, as the circular requires):

Agreement value	Maximum bank loan	Effective LTV	Your margin
₹25 lakh	₹22.5 lakh	90%	₹2.5 lakh
₹35 lakh	₹30 lakh	85.71%	₹5 lakh
₹40 lakh	₹32 lakh	80%	₹8 lakh
₹90 lakh	₹72 lakh	80%	₹18 lakh
₹1 crore	₹75 lakh	75%	₹25 lakh
₹1.5 crore	₹1.125 crore	75%	₹37.5 lakh

Two things stand out. Between about ₹33.3 lakh and ₹37.5 lakh, the loan is stuck at ₹30 lakh: going to 90% would push it into the 80% slab. And between ₹93.75 lakh and ₹1 crore, the loan stays at ₹75 lakh, because 80% would exceed ₹75 lakh while 75% has not yet reached it. A buyer near either band should expect to put in more cash than a straight percentage suggests.

These are ceilings. A bank may lend less, for example if your income does not support the EMI, or if its valuer puts the flat below the agreement price. The RBI does not stop a bank from being stricter.

Why the RBI links LTV to risk weights

For every loan, a bank must hold capital against a "risk-weighted" share of it. A 35% risk weight means only 35% of the loan counts towards the capital requirement; a 50% weight means half does. A riskier, higher-LTV loan needs more capital, so it costs the bank more to make. That is one reason some banks price their highest-LTV loans slightly higher.

This is changing. The RBI's Commercial Banks – Capital Charge for Credit Risk – Standardised Approach Directions, 2026 (RBI/DOR/2026-27/397, 27 April 2026) take effect on 1 April 2027. Under paragraph 16(5)(ii), a person's first two housing loans carry risk weights of 20% (LTV up to 50%), 25% (above 50% to 60%), 30% (above 60% to 80%) and 40% (above 80% to 90%). From the third housing loan, counted across the banking system and including co-applicants, the weights are 30%, 35%, 45% and 60%. Loans of ₹3 crore or more attract five percentage points more.

Those directions also say how LTV is measured for capital purposes: all loans on the same property are added together, and for a purchase the property value cannot be taken higher than the effective purchase price. They do not themselves set a lending cap; the tables stop at 90%.

Lower risk weights reduce banks' capital cost on smaller-LTV loans. Whether any of that reaches your rate is the bank's decision, and nothing in the directions requires it.

Top-ups and second loans count too

Because the 2026 directions treat sequential loans on the same flat as one exposure, a top-up loan raises the LTV of your property in the bank's books. Expect the lender to check the combined LTV, not just the new amount, before it agrees to a top-up.

Before you book

Work out your margin from the slab, not from a round 80% or 90%. Add stamp duty, registration and any other charges the builder collects outside the agreement value. Then ask the lender in writing for three numbers: its valuation of the flat, the LTV it is applying, and whether it treats any builder charges as part of the cost. A chartered accountant or the bank's loan officer can help you check the arithmetic.