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    Plot Loans

    In India, purchase of land has been one of the age old forms of investment. Conventionally, investors are inclined towards purchasing property either as an investment for future resale or for building a house. So, in case you’re planning to purchase a piece of land or vacant plot, a plot or land loan might be the right choice for you.

    What is a Plot Loan?

    Plot loans, also known as land loans, are a unique banking product designed to facilitate the purchase of a plot of land. A plot / land loan may often be confused with a home loan, as the latter also concerns the purchase of an existing / construction of new flat or house. However, land loans too addresses a similar need, with the prime difference that they are availed for the purchase of the land on which construction has to be carried out subsequently.

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    While home loans may be obtained with relative ease, a land loan might not be as easy to get. The reason behind this being, land loans concern not only the purchase of land but also the subsequent development of property on the land. When it comes to land loans, lenders operate at a higher risk, as land loans carry significantly higher risk, as compared to home loans. Here, the lender requires assurance about returns on the investment. For this reason, if you wish to up your chances of obtaining a land loan, it would be beneficial if you can provide adequate assurance to the lender about your development plans on the purchased property.

    For lenders, an undeveloped property is a greater risk than a developed property, as it is much easier for the landowner to dismiss an undeveloped property rather than a property which will be utilized as a source of income. For example, if you wish to obtain a land loan for farming purposes, your chances of getting the loan might be higher, as compared to someone, who wishes to purely to purchase the property, but does not have any concrete plans on its development.

    In India, several leading banks like ICICI, Axis Bank, HDFC Bank, Punjab National Bank, IDBI, Federal Bank, etc. offer plot loans to customers for the purchase of land.

    Features & Benefits of Plot / Land Loans:

    Plot/land loans have been around for a while and are accompanied by a distinct set of features. Listed below are some of the notable features and benefits of land loans.

    1. Location & Type of Property:

      While home loans are available for all kinds or types or properties, a land loan may only be availed for the purchase of a residential plot. Another limitation in availing a plot loan is that the land in question must be located within the limits of the respective municipality or corporation. A plot loan is usually taken for the purchase of land with the idea of constructing a house.

    2. Loan to Value Ratio (LTV):

      Loan to value or LTV basically implies to the amount of loan you can get against a property. While the LTV ratio for home loans may be anywhere between “80% to 85%, for plot loans it is significantly lower and could be capped at a maximum of 70% of the land value. So, if you are considering taking a plot loan to purchase land and construct a house thereupon, expect to bear about 30% of the total cost of the land.

    3. Tax Benefits:

      Contrary to popular belief, a land loan will not fetch you any tax benefits. You may however, avail tax benefits on a land loan, only if you plan to construct a house on the plot in the near future. In this case, the tax deduction will only be applicable on the construction amount of the loan and after the completion of the construction.

    4. Tenure:

      Compared to home loans, which usually carry longer tenure, a land loan is accompanied by a relatively shorter tenure. While the tenure for home loans may stretch up to a period of 30 years, the maximum available tenure for a land loan may stretch from 15 - 20 years.

    5. Loan Amount Limit:

      Plot loans offered by banks are often accompanied by a fixed upper limit. You may take the loan only up to a certain limit, as specified under the policy. Like other loans, different banks may carry different upper limits when it comes to land loans, so you must find out which suits you best based on your financial requirements.

    6. Clauses Included:

      If you wish to opt for a land loan, do keep in mind, there are certain pre-requisites which you will have to observe. The most prominent clause of any land loan is that it requires the borrower to begin construction on the acquired plot of land within a specified period of time.

    7. Prepayment Charges:

      Since a plot loan is not the same as a home loan, it is very likely that the loan provider may charge a prepayment penalty. In order to be sure, do enquire with your loan provider about the same beforehand.

    8. Interest Rates:

      Like other types of loans, the interest rates on plot loans can also be floating or fixed, depending on the bank and the prevailing market conditions. However, interest rates on plot loans are relatively higher as compared to other types of loans like home loans or auto loans.

    9. EMIs:

      Home loans are usually characterized by shorter tenures and higher EMIs. This is for the reason that plot loans are sanctioned for a shorter duration as compared to most other types of loans. EMIs on plot loans are also dependent on a number of other factors like the repayment capacity of the borrower, borrower’s age, etc.

    10. Down Payment:

      When it comes to land loans, down payments for them are usually higher. The loan to value ratio for land loans prevails around 70%, which means that the borrower would have to shell out around 30% of the plot value themselves.

    Eligibility:

    Land loans may be obtained by individuals who are residents of India and aged above 21 years. While NRIs also constitute a prominent part of property buyers segment in India, there are not many banks which extend plot loans to this category of individuals. Also, interest rates on plot loans might also be slightly higher for NRIs.

    Documents Required:

    Listed below is the list of basic documents which one may be required to furnish, in order to apply for a plot loan. The documentation requirements are subject to change depending on the eligibility criteria laid down by different lending institutions.

    1. Duly filled Application form
    2. Applicant’s photograph
    3. Proof of Identity
    4. Proof of Residence
    5. Most recent salary slip
    6. Bank statement for the last 6 months
    7. Form 16
    8. Cheque for loan processing fee

    Additionally, you may also be required to provide the following documents pertaining to the land.

    • Original documents pertaining to ownership of the land
    • ‘No Encumbrance’ Certificate for the plot
    • Layouts / drawings of the plot, duly approved by the Town Planning Authority.
    • Revenue receipts
    • Land records
    • Tax receipts for taxes paid by the landowner

    Plot Loan FAQ

    1. Will I get any tax benefits, if I take a plot loan?

      You may avail tax benefits on a construction loan, which forms a part of a plot loan. This implies that the loan combines the cost not only for purchasing the land but also to carry out construction on the purchased plot. A plot loan taken solely for the purpose of purchasing a plot or piece of land will not attract any tax benefit.

    2. I am a salaried individual. I wish to purchase a plot in order to begin construction of a house within the next 6 months. Am I eligible for a plot loan?

      Yes, you would be eligible for a plot loan, as the loan includes a clause which requires the borrower to begin construction of a house within a specified period of time.

    3. Can a plot loan be taken for purchasing agricultural or commercial land which is outside the city’s municipal or corporation limits?

      No, plot loans may only be taken for pieces of land which are located within the municipal limits and the land is meant for residential purposes.

    4. Does a loan for construction include the cost of labor and raw materials?

      Yes, a loan for construction will include both these costs.

    5. I am a self-employed Indian resident. Am I eligible for a plot loan?

      Yes, plot loans are also open to self-employed individuals who hold a healthy credit history.

    News About Home Plot Loan

    • YSR Congress Accuses State Government of Forcible Land Acquisition

      The YSR Congress accused the Andhra Pradesh government of coercing farmers to give up their fertile land under the garb of Land Pooling, also declaring that farmers are being denied their rightful compensation. Although the provisions for acquisition gave the government the go ahead after 90 percent of the villagers agreed, Bhumana Karunakar Reddy, a leader from the YSR Congress, criticized the government for acquiring land that overshot requirements. He further went on to say that farmers were threatened if they were unwilling to part with their lands. Mr Chandrababu Naidu has been accused of violating provisions of the Land Acquisition Act, 2013 and creating a massive land bank of 10 lakh acres through forcible land acquisition. It has been alleged that land has often been forcibly acquired for major projects in the capital region, the Bandar Port and Bhogapuram Airport.

      5th January 2017

    Plot Loan Reviews

    • Tata capital Home Loan
      "Average service"
      0.5 3.0/5 "Satisfactory"
      My home loan experience with TATA CAPITAL was average, the process was very long and it took 3 months for the process to be completed and the loan amount to get approved. The loan amount was for Rs 36 lakhs with the rate of interest of 14% which is nominal when compared to other banks and the tenure of the loan is 12 years. There were too many terms and conditions. Customer service was average and documents were collected door step.
      Was this review helpful? 2
      , hyderabad
      Reviewed on Dec 09, 2017
    • ICICI Bank Home Loan
      "Good service"
      0.5 3.0/5 "Satisfactory"
      I have taken home loan with ICICI bank and it was a good loan experience, the loan amount was for Rs 36 lakhs with the rate of interest of 8.65% which is nominal when compared to other banks. The tenure of this loan is 20 years. Customer service was good, they provided door step service to collect the documents. The process was quite long and it took 1 month for the loan amount to get disbursed.
      Was this review helpful? 0
      , thane
      Reviewed on Dec 09, 2017
    • DHFL Home Loan
      "Charges and interest rate to be better"
      0.5 3.0/5 "Satisfactory"
      The service was faster with DHFL Bank for the home loan. But rate of interest was high compared to the marked standard. The processing fee was normal. But insurance fee was high, they provided a insurance for me as well as for my home which was not required. The customer service and response is good.
      Was this review helpful? 0
      , kolkata
      Reviewed on Dec 09, 2017
    • SBI Home Loan
      "Faster service"
      0.5 5.0/5 "Blown Away!"
      Earlier SBI have offered 8.5% interest rate and later it was changed around 11%. It is a floating account for home loan. Whenever rate of interest decreases they should decrease the amount and there should be proper intimation. The process was faster and the disbursement was on time. The payment mode is convenient.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Dec 09, 2017
    • Axis Bank Home Loan
      "Looking for better interest rate"
      0.5 4.0/5 "Great!"
      I have home loan with AXIS, I availed it before five years. At the time they offered me 10.5% of interest, recently they have revised the rate of interest around 9.5%. I took the home loan of Rs. 13 lakhs for the tenure of 20 years, everything is good but interest rate is higher.
      Was this review helpful? 2
      , chennai
      Reviewed on Dec 08, 2017
    • Indiabulls Home Loan
      "Good service"
      0.5 4.0/5 "Great!"
      I have taken a home loan with Indiabulls.The loan amount is 25 lakhs,rate on interest is 9.65% very high compared to others.I pay an EMI of Rs 25,000 every month.They had processed the loan request within a month.I submitted documents and the tenure is for 20 years.
      Was this review helpful? 1
      , noida
      Reviewed on Dec 08, 2017
    • review Home Loan
      "Rate of Interest is high"
      0.5 3.0/5 "Satisfactory"
      I took this second Home Loan with Aadhar Finance, and the experience with it has been okay. They gave Rs.8.18 Lakhs and their process of getting the Loan was smooth. They are charging a Interest Rate of 13.99% which I feel is quite high. The overall experience has been alright.
      Was this review helpful? 2
      , junagadh
      Reviewed on Dec 07, 2017
    • SBI Home Loan
      "Good Loan"
      0.5 5.0/5 "Blown Away!"
      I took this Loan as a Co-applicant with my Father. The process of getting the Loan was very slow, the documentation process was a little confusing. Their Rate of Interest of 8.45% is one of the best that I have seen. The overall experience with it has been good.
      Was this review helpful? 2
      , junagadh
      Reviewed on Dec 07, 2017
    • Punjab National Bank Home Loan
      "Quick process"
      0.5 5.0/5 "Blown Away!"
      I had applied for a home loan with Punjab national bank.the loan amount is 38 lakhs,rate of interest is 8.35% low as compared to other banks.The net banking is bestway to make payment. I am holding this account for two years.They are very quick in processing the request and they always respond on time.I did not submit documents as the bank has got a tie up with the builder.
      Was this review helpful? 2
      , bangalore
      Reviewed on Dec 06, 2017
    • IOB Home Loan
      "Housing loan with IOB"
      0.5 5.0/5 "Blown Away!"
      I have taken a housing loan from INDIAN OVERSEAS BANK. The approved loan amount was 39 lakhs and the rate of interest was 8%. the monthly EMI is 12000. The tenure which i have taken was for 25 years. I can recommend this bank for home loan as they are providing the best interest rate when comparing with other banks.
      Was this review helpful? 2
      , hyderabad
      Reviewed on Dec 06, 2017
    • HDFC Limited Home Loan
      "Better"
      0.5 5.0/5 "Blown Away!"
      I am having the home loan with the HDFC limited and the interest rate was around 8.95%. The loan amount got disbursed within a month of time and they have to increase the speed of the process. I am happy with the HDFC limited.
      Was this review helpful? 2
      , chennai
      Reviewed on Dec 06, 2017
    • HDFC Limited Home Loan
      "Excellent service"
      0.5 5.0/5 "Blown Away!"
      My home loan experience with HDFC LTD was good, the loan amount was for Rs 25 lakhs with the rate of interest of 8.6% which is nominal when compared to other sources. The process was quite long, it took one month for the loan to get approved. Documents were collected door step but it took long time for verification. Customer service was good and they followed up correctly. The tenure of this loan is 20 years and there is no penalty on preclosure and part payment.
      Was this review helpful? 5
      , bangalore
      Reviewed on Dec 05, 2017
    • ICICI Bank Home Loan
      "Better service"
      0.5 3.0/5 "Satisfactory"
      The home loan service is not up to the mark with the ICICI bank . The additional charges are very high with the ICICI bank. The customer support and the response is not up to the mark with the ICICI bank. The transparency is not seen in the home loan process with ICICI bank.
      Was this review helpful? 1
      , chennai
      Reviewed on Dec 05, 2017
    • Axis Bank Home Loan
      "Good service"
      0.5 4.0/5 "Great!"
      I have taken a Home loan with Axis bank.The loan amount is 29 lakhs,rate of interest is very high as compared to other banks.The process took almost one month to complete the whole request.They had collected documents from my place.I am happy with the service.
      Was this review helpful? 1
      , chennai
      Reviewed on Dec 05, 2017
    • Axis Bank Home Loan
      "Card fradulent Trasaction happened at 3 times..."
      0.5 0.5/5 "Unacceptable"
      Yes , it happened 3 times in my credit card with out any notification. While talking with customer care regarding the issue they inform me that they are helpless to do anything. The solution they suggest is de-active the card and take new card from the bank. It was a surprise and very bad response ,and finally I cancel the card. These people eat my earned money.
      Was this review helpful? 0
      , pune
      Reviewed on Dec 05, 2017
    • SBI Home Loan
      "Good"
      0.5 4.0/5 "Great!"
      I have my home loan with SBI 10 years back . The loan amount was 3,50,000 and the interest rate was 11.63% which was bit high in the market . The tenure period was 20 years . The loan process was very easy here.There is no processing fee also. My overall expererenc was good.
      Was this review helpful? 5
      , godhra
      Reviewed on Dec 05, 2017
    • HDFC Limited Home Loan
      "Good"
      0.5 3.0/5 "Satisfactory"
      I had applied for a home loan with HDFC LTD through online channel. I have chosen HDFC Bank because my property was pre approved. It was easy to go with the pre approved banks. There were some hidden charges which was not explained clearly. The rate of interest was normal, and the rate of interest offered was 8.35%.
      Was this review helpful? 3
      , bangalore
      Reviewed on Dec 04, 2017
    • DHFL Home Loan
      "Good service"
      0.5 4.0/5 "Great!"
      My home loan experience with DHFL was good, i have taken loan for Rs 14.04 lakhs with the rate of interest of 9.5% which is bit high when compared to other sources. It took one month for the loan amount to get approved. The processing fees is very high and also there is a penalty on preclosure of the loan. Customer service was good and they followed up correctly, they provided door step service to collect the documents.
      Was this review helpful? 1
      , navi mumbai
      Reviewed on Dec 04, 2017
    • HDFC Limited Home Loan
      "Better service"
      0.5 5.0/5 "Blown Away!"
      The home loan has been disbursed by HDFC limited around 6 months ago. The customer support was good with the HDFC limited. They have processed and approved the home loan within a week time. The rate of interest and the charges are average with the HDFC limited. I am satisfied with the loan amount.
      Was this review helpful? 2
      , chennai
      Reviewed on Dec 04, 2017
    • HDFC Limited Home Loan
      "Its Average"
      0.5 3.0/5 "Satisfactory"
      In the year of 1983, I applied for home loan from HDFC Limited, at the time there was no online process. Hence I undergone with lots of manual process. The valuation of property got changed it was serviced by HDFC, Finally I took the loan from outside.
      Was this review helpful? 2
      , pune
      Reviewed on Dec 04, 2017
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