Tips and Strategies on How to Save for Home Renovation
May 01, 2025

Home renovation is an exciting yet expensive undertaking that can breathe new life into your living space. Whether you're renovating to enhance functionality, improve aesthetic appeal, or increase the value of your home, the costs can quickly add up. According to a report by Housing.com, the average cost of a mid-range home renovation in India can range from ₹2 lakh to ₹10 lakh, depending on the size and type of work.
But don’t fret—saving for a home renovation doesn’t need to be overwhelming. With the right strategies, you can fund your renovation without putting undue stress on your finances. This guide will walk you through effective methods to save for home renovations, such as leveraging savings accounts, fixed deposits (FDs), recurring deposits (RDs), and home renovation loans.
The Importance of Planning for Home Renovation in India
Renovating a home is not just about adding value to your property—it’s also about making your space more livable and enjoyable. Home renovations, particularly in urban India, are often driven by the need to adapt to modern lifestyles and changing family dynamics.
That said, renovation projects can be expensive, and most homeowners can’t afford to pay the full amount upfront. Therefore, planning ahead for your renovation and saving systematically is essential. By starting early and following a disciplined savings strategy, you can ensure that your renovation project is financially manageable.
Step 1: Set a Realistic Renovation Budget
The first step in any home renovation project is to determine how much you’ll need. It’s crucial to have a clear understanding of the costs involved, including:
- Materials: The cost of materials, such as tiles, wood, paints, and fixtures, will vary depending on your choice of quality and design.
- Labour Costs: In India, labour costs for home renovation projects vary widely based on location and the type of work. Metropolitan cities like Delhi, Mumbai, and Bengaluru tend to have higher labor costs.
- Contingency Fund: It’s always wise to add an additional 10-20% of your total renovation budget for unforeseen expenses.
After calculating these factors, you’ll have a ballpark estimate of how much you need to save.
Step 2: Choose the Right Savings Strategy
Once you know how much you need to save, it’s time to decide on the best method for accumulating funds. Here are some popular savings options in India:
Savings Account: Simple and Accessible
A savings account is a good option if you want easy access to your money. You can deposit your savings regularly, and your funds will be safe. However, the interest rates offered by most savings accounts are low—typically ranging from 2.5% to 4% per annum. But with Ujjivan Small Finance Bank, you can earn more than 7% p.a. on Savings Accounts.
Fixed Deposits (FDs): Safe, Steady Growth
A Fixed Deposit (FD) is one of the most popular ways to save in India. With FDs, you deposit a lump sum amount with the bank for a fixed tenure, ranging from 7 days to 10 years, and in return, you receive guaranteed interest. With Ujjivan Small Finance Bank, you can more than 8% p.a. with Fixed Deposits.
FDs are especially helpful for people looking to save a significant sum over a period of time without worrying about market fluctuations.
Recurring Deposits (RDs): Regular Contributions
A Recurring Deposit (RD) allows you to deposit a fixed amount each month into your account for a fixed term, and the bank pays interest at the end of the tenure. The interest rates on RDs are similar to FDs. RDs are ideal for individuals who prefer saving smaller amounts regularly.
RDs are especially helpful for people with a steady income stream who want to save consistently for a home renovation.
Public Provident Fund (PPF): Long-Term Savings with Tax Benefits
The Public Provident Fund (PPF) is a long-term, tax-saving scheme that offers attractive interest rates (currently around 7.1% p.a.) and tax benefits under Section 80C of the Income Tax Act. While the PPF has a lock-in period of 15 years, it can be a good choice if you plan to save over a long period for a renovation project.
If your renovation project is a few years away, investing in a PPF could be a good strategy for growing your savings while enjoying tax benefits.
Step 3: Home Renovation Loans
If your renovation needs are urgent and you don’t have enough time to save, you can consider a home renovation loan. These loans are specifically designed to fund home improvement projects and can be availed from banks like Ujjivan SFB.
Personal Loans for Home Renovation
A personal loan is one of the easiest and quickest ways to fund a home renovation. Personal loans are unsecured loans, meaning you don’t need to provide collateral. The interest rates typically range from 10% to 20% per annum, depending on the lender and your creditworthiness. Personal loans can be used for various home renovation expenses, from small repairs to large-scale renovations.
Home Improvement Loans
Home improvement loans are a popular option for homeowners in India who wish to renovate their properties. These loans are secured against your property, meaning you’ll get lower interest rates than personal loans.
Home Equity Line of Credit (HELOC)
A Home Equity Line of Credit (HELOC) is a revolving credit line where you borrow against the equity in your home. You can draw from the credit line as needed, which provides flexibility. The interest rates are typically lower than those of personal loans but can be variable.
Step 4: Supplement Your Savings with Extra Income
To speed up your savings process, consider exploring additional income streams. Whether through freelancing, part-time work, or selling unused items, the extra income can boost your renovation fund significantly.
Final Thoughts
Saving for a home renovation may take time, but with consistent effort and a clear plan, you’ll be able to fund your project without compromising your financial stability. Whether you choose traditional savings methods like savings accounts, FDs, and RDs, or you opt for a home renovation loan, planning ahead is the key to success. The goal is to ensure you can comfortably finance your renovation without relying too heavily on high-interest loans or credit cards.
Elevate your financial life with Ujjivan Small Finance Bank. Our wide range of financial products are designed to make your financial life better.
FAQs
1. How much should I save for a home renovation in India?
The amount depends on the scale of the renovation. For a basic renovation, ₹2-5 lakh might suffice, while larger renovations can cost ₹10 lakh or more. It's important to set a realistic budget.
2. Can I use a savings account for home renovations?
Yes, savings accounts are a good option for short-term saving. Additionally, the funds are easily accessible, whenever you need.
3. What are Fixed Deposits (FDs), and how can they help with home renovations?
FDs allow you to deposit a lump sum amount for a fixed tenure and earn guaranteed interest. They offer better returns than savings accounts and are suitable for medium-term savings.
4. How do Recurring Deposits (RDs) work for saving for home renovations?
RDs allow you to save a fixed amount every month, and you earn interest on the total amount at the end of the tenure. RDs are ideal for disciplined savers.
5. Can I apply for a personal loan to fund my renovation?
Yes, personal loans can be used for home renovations. They are unsecured loans, so you don’t need collateral, but the interest rates may be higher. As an altern
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