EMIs for Solar? Understanding Loans, Subsidies & Pay-As-You-Save Models in India

With the cost of solar power decreasing and government incentives increasing, there has never been a better time to switch to solar power and take charge of your energy bill and save the planet for a greener, cleaner tomorrow.

May 01, 2025. By News Bureau

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Solar system installation

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With the increased awareness of climate change and the growing need for sustainable energy, the installation of solar energy solutions, particularly rooftop solar systems, has increased dramatically in India. These not only cut down high electricity bills, but also the carbon footprint. The single biggest disincentive to solar system installation for most people is the up-front cost. In order to counter this, a range of funding arrangements—loans, subsidies, pay-as-you-save, etc.—have been developed to make solar installations accessible to households and enterprises.

In this article, we will discuss the various funding sources today in India for solar installations, such as bank loans, subsidies, and the Pay-As-You-Save plan, and how they can save you money and the world too.

Making Solar Affordable with EMI Plans
If you wish to go for solar power but are worried about the initial cost, taking a loan is possible. Banks and Non-Banking Financial Institutions (NBFCs) in India provide solar scheme loans with varying terms of repayment based on the capacity of the system.

— Bank Interest Rates & Loan Terms
The solar loans generally have interest rates that vary according to the system size to be installed and the lender.

For projects of capacity up to 3 kW, the banks will provide loans at a rate of interest of 7 percent. The loan will repay 90 percent of the project cost, and 10 percent will be paid as a down payment by the owner. The tenures of such loans are negotiable, with tenures varying from 6 to 120 months (EMIs).
For above 3 kW capacity, the loan interest rate is increased to 9 percent to 10 percent, and the project loan absorbs 80 percent, and the owner pays a down payment of 20 percent. The tenors of such loans in such schemes are typically between 6 and 120 months (EMIs) and are highly flexible in repayments.

Non-Banking Options for Solar Loans
Non-Banking Financial Companies (NBFCs) also offer loan facilities for solar power systems. In the case of solar systems that are installed on the rooftop and have capacities between 1 kW to 10 kW, NBFCs offer 80 percent financing of the project cost and 20 percent payment in advance from the customer. The loan duration of the solar systems has different ranges of 6 to 60 months (EMIs), which gives a shorter tenure of repayment.

One of the benefits of availing a loan for solar installation is that the savings on electricity bills through the solar system can typically be utilised to pay back the EMIs. The savings on electricity bills on your side every month can repay the loan, and it is an affordable option for individuals and businessmen as well.

Government Incentives for Rooftop Solar
The Indian Government also offers subsidies for solar panels, and schemes, such as the PM Surya Ghar Yojana, can help lower the cost of initial installation quite substantially, hence making the rooftop solar project financially viable for houses and companies. These subsidies are used as a way of lowering the economic cost to consumers. Subsidies are also offered for repairing rooftop solar equipment, and solar energy has penetrated the residential and commercial segments by making it affordable.

— Subsidy for Rooftop Solar Systems
The government subsidy scheme offers cashback on systems ranging from 1kW to 10kW. Following is the application of the subsidy scheme:

INR 30,000/- for 1kW solar rooftop system.
INR 60,000/- for 2kW solar rooftop system.
INR 78,000/- for 3kW to 10kW solar rooftop system.

This subsidy can be a huge saving, particularly for big systems, and can bring down the initial solar installation cost substantially. Besides the subsidy given by the central government, there are some state governments that offer their own incentives to encourage the use of rooftop solar systems. These state subsidies can also lower the cost for homeowners and entrepreneurs who are willing to go for solar power.

By the inclusion of a government subsidy and a loan, consumers are able to save considerable out-of-pocket costs, and hence their use of solar energy becomes more viable.

The Pay-As-You-Save Model
For consumers who don't want to spend any amount of money initially or borrow funds, the Pay-As-You-Save program is an option to consider. What this program does is allow the consumer to get solar systems installed without spending money at all initially.

— Save First, Pay Later: How the Model Works
Through the PAYS model, a solar system firm installs a roof solar system on your company without making an initial payment. The system is installed, and the consumer saves on electricity payments immediately. The only difference is that rather than paying for the system upfront, the consumer pays a fixed amount to the solar company every month, which in most cases is a fraction of the saved amount from reduced electricity consumption.

This model enables you to pay for the system pay-as-you-go basis and utilise the savings you accumulate when running the system itself, with no up-front cost. It's a decent choice for those who wish to install solar but do not have enough initial capital to obtain a loan or to make a down payment.

Selecting the Smartest Solar Solution
The appropriate fund choice will be subject to your interest, financial status, and long-term vision.

Loan Model: If you are comfortable with making a down payment and do not mind a fixed EMI, choose a loan. With it, you'll become the owner of the solar system and save on electricity bills instantly.
Subsidy Model: If you're interested in reducing the upfront cost significantly, the government subsidy can be an excellent option. Couple this with a loan or an EMI scheme in order to reduce the cost of solar power even more.
Pay-As-You-Save Model: In case you do not want to invest or make a down payment, this model offers the benefit of payment by savings. It's best for those who'd like solar to be installed without spending even a rupee.

Solar power utilisation in India is no longer a luxury but a necessity. Through its offering of pay-as-you-sell packages and government subsidies, among other financing flexibility, homes and businesses can leverage the power of solar energy without the weight of an initial cost. With the cost of solar power decreasing and government incentives increasing, there has never been a better time to switch to solar power and take charge of your energy bill and save the planet for a greener, cleaner tomorrow.

There are various models, and each has its own positives, so if you are familiar with their functionality, then you can select the most appropriate one to mount a rooftop solar system and gain economically and ecologically in the long run.

- Jai, CEO, Galo Solar

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