Hi Mihir,
There are many ways how water helps in weight loss but the prominent ones are:
1. Suppressing appetite - especially if you drink it before any main meal. This way there is less space for food, you feel fuller fast.
2. Improves metabolism - For a normal calorie burning process, your body needs adequate amount of water. And lesser the water you drink, the fat-burning process gets slower.
Lime in luke warm water with honey, does help you in weight loss as it acts as a good fat burner, making way for losing weight faster.
Excess of lime can be bad too, it can lead to erosion of your tooth enamel and gastric discomfort. 1 litre of lime juice in a day would be enough.