One can avail a home loan to buy a constructed home. For those who want to buy land for future use, they can avail a loan for land purchase. A plot loan is applicable for the purchase of land or a vacant plot.
Features Of A Plot Loan For Land Purchase
Lower loan value
The Loan To Value (LTV) on a plot loan is pretty low at 70%. That means a plot buyer can avail only 70% of a property’s value as the loan amount. The buyer must come up with the remaining 30% of the funds. So one must have the remaining amount sourced through other methods to put down when they consider buying land. In contrast, the LTV on home loans can be as high as 90%.
Forgo any tax benefit
There aren’t any tax benefits when availing a plot loan. The only tax benefit a plot buyer can avail is if a house is constructed on the plot of land. If so, the tax deduction is applicable only after completion of construction and is applicable to the loan amount taken against construction. A housing loan, on the other hand, enables buyers to claim a tax deduction on the principal and interest amount.
Banks offer land loans for a relatively shorter duration when compared to home loans. Banks offer a plot loan with a maximum duration/term of 15 years. Certain Non-Banking Finance Corporations do offer plot loans for a 20-year duration. Comparatively, home loans are offered for longer durations of up to 30 years.
Plot loans have an upper limit. Banks generally give out a maximum of INR 1 Crore to INR 50 Lakh on a plot loan, depending on the bank. A bank analyses a buyer before assigning a loan limit. It i essential to do a little research before selecting a loan provider.
Conditions For Getting A Plot Loan For Land Purchase
Resident of India/NRI
Only Indian residents are permitted to purchase land in India. Although, certain exceptions are permitted. Non-Resident Indians (NRI’s) with OCI cards are also allowed to purchase property in India. Very few banks process NRI plot loans. The ones that process NRI plot loans do so at higher interest rates.
An individual’s repayment capacity is essential in determining if they will get a plot loan. A person should have a healthy monthly income, a good saving history, a good CIBIL score, other income (if applicable), etc. A plot buyer should also furnish the allotment letter, sale deed, title deed, drawings of purchase, etc. when applying for a land loan.
Features of the land
Land loans and Plot loans are generally applicable on residential plots located within municipal limits. A land loan cannot be taken for a plot located in a village or on an agricultural plot meant for cultivation. In contrast, home loans are issued on all types of properties in any location. A home loan can also be taken to construct property on a plot purchased through a land loan.
A buyer must be compliant and due diligent when buying land. This means checking past manual records, the reservation/use of land, floor space index compliance, etc. Developed plots are always the safest to buy. Developed plots are accommodated with electricity, water, sewage, loans, etc. So buyers can buy and be rest assured of other regulation issues.