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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 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.

    Perfect Home Loan Deals for you

    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.

    Plot loan eligibilty criteria

    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 for plot loan

    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.

    Plot Loan Reviews

    • Central Bank of India Home Loan
      "Good service"
      0.5 4.5/5 "Excellent!"
      My home loan experience was good with CBI, the loan amount was for Rs 12 lakhs with nominal interest rate when compared to other banks. Customer service was good and they followed up on time The tenure period for this loan is 15 years.
      Was this review helpful? 0
      , ghaziabad
      Reviewed on Aug 17, 2018
    • ICICI Bank Home Loan
      "Good service"
      0.5 4.0/5 "Great!"
      I have taken a home loan with ICICI bank and my loan experience was good, the loan amount was for Rs 6 lakhs with high interest rate of 13%. Customer service was good with ICICI bank and they responded on time I pay an EMI of Rs 8300 and the tenure period for this loan is 10 years.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Aug 17, 2018
    • SBI Home Loan
      "BEST"
      0.5 4.0/5 "Great!"
      My home loan amount was taken with SBI . I use to pay 25000 as EMI and tenure period is 25year .My loan amount is up to the mark. There is no charge for preclosere .I have not face any inconvenience at the time of documentation so far my experience is good with this bank
      Was this review helpful? 0
      , chennai
      Reviewed on Aug 17, 2018
    • HDFC Limited Home Loan
      "Satisfactory"
      0.5 5.0/5 "Blown Away!"
      My home loan is with HDFC Ltd and the customer services and response was good. The documentation was collected on time. The rate of interest and processing charges are normal and the after loan services are also good. There has been no hassles till date.
      Was this review helpful? 0
      , bangalore
      Reviewed on Aug 17, 2018
    • ICICI Bank Home Loan
      "Overall good."
      0.5 5.0/5 "Blown Away!"
      My home loan is with ICICI Bank and the process was smooth and easy. There was no much of documentation and the experience was nice. The customer support and response is good and there are no issues to get the loan. The rate of interest and processing charges are reasonable too.
      Was this review helpful? 1
      , navi mumbai
      Reviewed on Aug 16, 2018
    • review Home Loan
      "Good service"
      0.5 5.0/5 "Blown Away!"
      I have taken home loan with GIC BANK . So far my experience is good with this bank i have not face any inconvenience at the time of documentation . Interest rate is 8.95% and it is nominal . I use to pay 35000 as EMI and there is no processing fee charged by this bank . My loan amount is up to the mark. The preclosere is 3% on loan amount .
      Was this review helpful? 0
      , new delhi
      Reviewed on Aug 16, 2018
    • Corporation Bank Home Loan
      "GOOD"
      0.5 3.0/5 "Satisfactory"
      I have taken home loan with CORPORATION BANK . I use to pay EMI 40000 and tenure period is 20years . I am not happy with customer services they need some improvement because i cannot connect them easily . Processing fee will be waive off , rate of interest is 8.6% and it is nominal in the market . There is option of precloure too . My loan amount is up to the mark .
      Was this review helpful? 0
      , chennai
      Reviewed on Aug 16, 2018
    • HDFC Limited Home Loan
      "Fast process"
      0.5 5.0/5 "Blown Away!"
      HDFC LTD is good overall and the process is good for the home loan. The customer services and response is good and there are no issues to get the loan. They processed the loan very fast and as soon as I asked for the disbursement, it was done for me within 24 hours.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Aug 16, 2018
    • DHFL Home Loan
      "Good Service"
      0.5 3.5/5 "Pretty good"
      My home loan was taken with DHFL few months back.The loan amount was 18 lakhs and the interest rate was very satisfactory . The tenure period was 15 years. I am not satisfied with the service and responses . There is no proper response at all. They have taken a month of time to sanction the loan but the processing fee is nominal.
      Was this review helpful? 0
      , chennai
      Reviewed on Aug 16, 2018
    • Punjab National Bank Home Loan
      "Good"
      0.5 3.5/5 "Pretty good"
      My home loan was taken with PNB 3 years back. The loan amount was 24 lakhs and the interest rate was satisfactory . The tenure period was 30 years here. The loan process was very smooth and good. There is no inconvenience faced and the processing fee was also nominal. The documentation and verification was a bit tedious.
      Was this review helpful? 1
      , bangalore
      Reviewed on Aug 16, 2018
    • HDFC Limited Home Loan
      "Excellent"
      0.5 5.0/5 "Blown Away!"
      My home loan was taken with HDFC ltd 4 months bank.l The loan amount was 26 lakhs and the interest rate was very satisfactory . The EMI period was 30 years . I had a very good process here and the processing fee was also nominal. The documentation part was very good and smooth.
      Was this review helpful? 0
      , chennai
      Reviewed on Aug 16, 2018
    • Indian Bank Home Loan
      "good"
      0.5 5.0/5 "Blown Away!"
      I have taken home loan with INDIAN BANK . There is no hidden charges. I use to pay EMI on time and tenure period is 20years. I am satisfied with customer service, i did not face any inconvenience at the time of documentation . Processing fee is nominal. My loan experience was good. My loan amount is up to the mark .
      Was this review helpful? 2
      , gurgaon
      Reviewed on Aug 14, 2018
    • SBI Home Loan
      "GOOD SERVICE "
      0.5 4.0/5 "Great!"
      Documentation and processing was easy , but they took more than a month of time to provide the loan , i got the expected loan value from them, they can improve the transparency about the process, so that the customers will come to know the exact stage of process.
      Was this review helpful? 2
      , hyderabad
      Reviewed on Aug 14, 2018
    • IOB Home Loan
      "Satisfactory"
      0.5 5.0/5 "Blown Away!"
      My home loan is with IOB. The customer services and response is good. The customer services and response is good as the document collection was on time and the disbursement was also as needed. The after loan services was smooth too. The rate of interest and charges are very much nominal.
      Was this review helpful? 0
      , chennai
      Reviewed on Aug 14, 2018
    • Indiabulls Home Loan
      "AVERAGE"
      0.5 2.0/5 "Expected more"
      I have taken home loan with INDIA BULLS . Interest rate is 8.6% which floating , and my loan amount is up to the mark. There is no hidden charges. I use to pay 4600 as pre EMI per month and tenure period is 20years. Customer service response is good. Processing fee is 3500 . The services is good did not face any difficulty at the time of documentation.
      Was this review helpful? 1
      , new delhi
      Reviewed on Aug 14, 2018
    • IDBI Home Loan
      "More than satisfactory"
      0.5 5.0/5 "Blown Away!"
      Since the land I bought was already approved with IDBI. There were no hassles for me when I applied for a home loan. They did all the documentation work for me and I did not have to run around for anything. The tenure was for 20 years and I closed my loan in ten years itself. I also did not have issues after the closure, they handed over all the documents in 15 days.
      Was this review helpful? 0
      , bangalore
      Reviewed on Aug 13, 2018
    • SBI Home Loan
      "High on ROI and charges"
      0.5 4.0/5 "Great!"
      My home loan is with State Bank of India. The customer services are good and the process was fine to get the loan. The documentation was nominal too. But they have offered me a very high rate of interest which is around 9%. The processing charges are also very high.
      Was this review helpful? 2
      , gurgaon
      Reviewed on Aug 13, 2018
    • SBI Home Loan
      "Good service"
      0.5 4.0/5 "Great!"
      I got my housing loan from State bank of India . Am satisfied with rate of interest which is promising one The customer service and response is good. It took 7 days for the documentation and approval process. They gave the tenure period of 20 years where i make the payment through Nach .
      Was this review helpful? 1
      , noida
      Reviewed on Aug 13, 2018
    • Punjab National Bank Home Loan
      "Good overall"
      0.5 5.0/5 "Blown Away!"
      I have done a home loan transfer with Punjab National Bank. The customer services and response is good and there are no issues in the process. The loan was processed on time and the interest rate and charges are normal. The after loan services is good too.
      Was this review helpful? 6
      , pune
      Reviewed on Aug 11, 2018
    • LIC Housing Home Loan
      "LIC HOME LOAN"
      0.5 1.0/5 "Really Bad"
      Never take home loan from LIC... worst structure. be mindful before going for home loan at LIC. They will never decrease home loan rate even if it it will go down and they may increase it if RBI increase Repo rate. careful guys. you can get at better rates
      Was this review helpful? 1
      , vadodara
      Reviewed on Aug 11, 2018
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