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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

    • Axis Bank Home Loan
      "Good Experience"
      0.5 4.0/5 "Great!"
      AXIS home loan interest is good they offered 8.65% for the loan amount of Rs. 60 lakhs for the tenure period of 20 years. But I am little disappointed with their rate of interest, initially they committed 8.4% of interest finally they sanctioned my loan with 8.65% it was bit high.
      Was this review helpful? 0
      , pune
      Reviewed on Nov 23, 2017
    • Bank Bazaar Home Loan
      "Excellent"
      0.5 5.0/5 "Blown Away!"
      The bank bazaar website is good and easy to access. They helped me a lot in finding the better solutions. It was a very nice experience with bank bazaar. The customer service was good. The response was fast and prompt. The website was user friendly and speed was good.
      Was this review helpful? 0
      , mumbai
      Reviewed on Nov 23, 2017
    • Punjab National Bank Home Loan
      "Unhappy"
      0.5 3.0/5 "Satisfactory"
      I had applied for a home loan with PNB housing finance through online channel. Still now I haven't received sanctioned letter and disbursement letter. They need to improve the customer service drastically. The rate of interest was good. I make the payment through ECS, its more convenient.
      Was this review helpful? 0
      , mumbai
      Reviewed on Nov 23, 2017
    • Bank Bazaar Home Loan
      "Good platform"
      0.5 4.5/5 "Excellent!"
      The website is customer friendly and effective in providing all the financial service. Its a best platform for comparing all the financial needs and we could able to know the best deals from all the banking sectors.The executives are very good and supportive.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Nov 23, 2017
    • HDFC Limited Home Loan
      "HDFC LTD home loan"
      0.5 4.5/5 "Excellent!"
      I am not interested in taking a loan for now with HDFC LIMITED. Later in future if i am planning to take a home loan then i can consider HDFC LIMITED, if the rate of interest is feasible. The response and the follow up from the institution was perfectly fine.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Nov 23, 2017
    • Punjab National Bank Home Loan
      "Home loan with PNB"
      0.5 5.0/5 "Blown Away!"
      I was just checking the rate of interest with PNB HOUSING FINANCE LIMITED. I am planning to take the loan by next march 2018 and when the executive contacted me i replied them the same. They told they will definitely help at that time. Its a good institution.
      Was this review helpful? 0
      , rohtak
      Reviewed on Nov 23, 2017
    • Bank Bazaar Home Loan
      "Friendly website"
      0.5 5.0/5 "Blown Away!"
      In bankbazaar there are many options to compare among other banks. We can choose the best offers with the best interest rate. I am planning to get more products when needed through bankbazaar. The executive who contacted me was really helpful and friendly.
      Was this review helpful? 0
      , rohtak
      Reviewed on Nov 23, 2017
    • Bank Bazaar Home Loan
      "Need to include more banks"
      0.5 4.0/5 "Great!"
      I suggest bankbazaar to be in tie up with more banks and also they have to provide an option for comparing the processing fee too. When we check for a particular product top 10 banks for that product has to be displayed, That will help customers to understand about the bank service.
      Was this review helpful? 0
      , chennai
      Reviewed on Nov 23, 2017
    • Bank Bazaar Home Loan
      "Excellent"
      0.5 4.0/5 "Great!"
      I had a good experience with bank bazaar. I used the website for a first time. They are giving good suggestions and proper guidance to the customers. It is easy to compare and find out the best offers. The customer service and response was up to the mark.
      Was this review helpful? 0
      , kolkata
      Reviewed on Nov 23, 2017
    • Punjab National Bank Home Loan
      "Excellent"
      0.5 4.0/5 "Great!"
      My home loan was taken with PNB housing finance. The documentation process was simple. Executive came to my place and collected the documents. The interest rate was little bit high but it was good. The payment option is easy and convenient.
      Was this review helpful? 0
      , kolkata
      Reviewed on Nov 23, 2017
    • Bank Bazaar Home Loan
      "Friendly service"
      0.5 4.0/5 "Great!"
      They have good comparison with other banks. We can choose best deals.The impressive factor about bankbazaar is its time saving I have applied for a home loan with HDFC. The experience with then went well. I got immediate calls and the follow up was also great.
      Was this review helpful? 0
      , bangalore
      Reviewed on Nov 23, 2017
    • HDFC Limited Home Loan
      "Approachable"
      0.5 4.0/5 "Great!"
      As i have taken a personal loan i did not go up for a home loan. The institution was good and comfortable. In future if i am planning to take a home loan then i can consider HDFC LIMITED. The customer service and response from there end was satisfying.
      Was this review helpful? 0
      , bangalore
      Reviewed on Nov 23, 2017
    • LIC Housing Home Loan
      "Deals are good"
      0.5 3.5/5 "Pretty good"
      There was no much hassles for me to get the home loan from LIC housing finance. The disbursement was more or less on time and the rate of interest was good. I got a floating rate of 8.35%. The processing charges was normal as well. In all no issues.
      Was this review helpful? 0
      , mumbai
      Reviewed on Nov 23, 2017
    • HDFC Limited Home Loan
      "Better"
      0.5 3.5/5 "Pretty good"
      I am having the home loan with the HDFC limited and the customer service is good one too like its a kind of fair. The loan amount got disbursed within three years of time, also am really happy with the HDFC limited for my home loan disbursal.
      Was this review helpful? 0
      , noida
      Reviewed on Nov 23, 2017
    • Bank Bazaar Home Loan
      "Good service"
      0.5 3.0/5 "Satisfactory"
      This was my first time experience with bankbazaar and it was good, the services provided by bankbazaar is good when compared to all other banking websites. Customer service from bankbazaar was good and their response was prompt. I am using the bankbazaar website, it is easy to access and is user friendly.
      Was this review helpful? 0
      , kolkata
      Reviewed on Nov 23, 2017
    • HDFC Limited Home Loan
      "Good customer service"
      0.5 4.0/5 "Great!"
      I have applied for the home loan from HDFC LTD, my loan application was closed because the property was not in my name. Apart from this, there was no issue from the customer service, they responded on time and their service was good. The rate of interest is nominal when compared to all other sources in the market.
      Was this review helpful? 0
      , kolkata
      Reviewed on Nov 23, 2017
    • Bank Bazaar Home Loan
      "Good website for Banking needs"
      0.5 5.0/5 "Blown Away!"
      Good support and good technology driven platform to connect bankers and customers. Defenetly this company is going extra last mile to fullfill customer needs. Can get all Banking Solutions in single windows.very much pleased with the service also.
      Was this review helpful? 0
      , chennai
      Reviewed on Nov 22, 2017
    • Bank Bazaar Home Loan
      "Excellent"
      0.5 5.0/5 "Blown Away!"
      Bank Bazaar is a good website, they are doing a proper customer service. It is very easy to compare with all other banks at one website. I am using it for past 2 years. The website is very informative. The calculator and credit score option is good. It was a fantastic service without any hassle.
      Was this review helpful? 0
      , secunderabad
      Reviewed on Nov 22, 2017
    • Axis Bank Home Loan
      "Good"
      0.5 4.0/5 "Great!"
      It was a good experience with Axis Bank on home loan. The customer service and response is good. The rate of interest was good but processing charging and documentation fee is bit more because other bankers are doing zero processing fee. The payment option is convenient.
      Was this review helpful? 0
      , secunderabad
      Reviewed on Nov 22, 2017
    • Punjab National Bank Home Loan
      "Need to improve the service"
      0.5 2.0/5 "Expected more"
      My home loan was taken with PNB but I am not satisfied with the PNB housing finance. They didn't respond properly. They are not updating the customer. The loan process was delayed. There is no acknowledgement for the document collection. I would appreciate if they provide a better service.
      Was this review helpful? 0
      , tumkur
      Reviewed on Nov 22, 2017
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