One permission requirement that is often overlooked is a user needs x permissions in every parent directory of a file to access that file. Check the permissions on /, /home, /home/demo, etc. for www-data x access. My guess is that /home is probably 770 and www-data can’t chdir through it to get to any subdir. If it is, try chmod o+x /home (or whatever dir is denying the request).
EDIT: To easily display all the permissions on a path, you can use namei -om /path/to/check