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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.

    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.

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    Plot Loan Reviews

    • SBI Home Loan
      "Need to improve the process"
      0.5 5.0/5 "Blown Away!"
      I have bought my home loan from State bank of India. When i compared with the other bank regarding the interest rates they have provided the low interest rates. Since its a leading loan in India, whatever the interest updates and Policy changes its effect first in this bank. They have taken more than 1 month to sanctioned the loan.
      Was this review helpful? 1
      , bangalore
      Reviewed on Feb 16, 2019
    • HDFC Limited Home Loan
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      It has been a good experience i had with this loan where the loan amount which they had provided has been sufficient. The interest rate with them has been pretty nominal and the charges which they had made has been nominal as well. Their customer support has been quite helpful and has been responsive.
      Was this review helpful? 1
      , hyderabad
      Reviewed on Feb 15, 2019
    • Axis Bank Home Loan
      "Process is good"
      0.5 5.0/5 "Blown Away!"
      My home loan is with Axis Bank and the process to get the loan is good. The disbursement happened on time and the customer support and response is good. The documentation was also a smooth process. The rate of interest and processing charges is normal.
      Was this review helpful? 0
      , pune
      Reviewed on Feb 15, 2019
    • SBI Home Loan
      "Good service"
      0.5 5.0/5 "Blown Away!"
      I took my home loan in State Bank of India before 3 years. I have purchased a residential property. I am satisfied with the interest rate and there was a minimum processing fee. The loan process was okay and they have offered me a good service. The loan duration is 15 years.
      Was this review helpful? 0
      , kolkata
      Reviewed on Feb 15, 2019
    • Punjab National Bank Home Loan
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      The experience i had in getting my Home loan through them has been quite good. It was a pre approved loan and the loan amount has been sufficient as well, the interest rate with them has been nominal when compared with the market rate. There has not been any sort of extra charges which they had made so far.
      Was this review helpful? 0
      , chennai
      Reviewed on Feb 15, 2019
    • SBI Home Loan
      "Government subsidery hence they will implement updates immed"
      0.5 4.5/5 "Excellent!"
      Taken my home loan from SBI. Customer care service is not that much but the interest rates were pretty much good. There is so simple process but when i applied the loan they have asked for lots of documents individually and it took more time to get the loan. They have given me a interest rate of 8.5% and they have not taken any processing fee.
      Was this review helpful? 2
      , bangalore
      Reviewed on Feb 15, 2019
    • SBI Home Loan
      "Best Service"
      0.5 5.0/5 "Blown Away!"
      I have taken a home loan with SBI and my experience was good, the loan amount was sufficient and the rate of interest was nominal when compared to other banks. Customer service was good with this bank. Tenure period is 15 years out of which 3-4years is completed. I make my EMI payment through online.
      Was this review helpful? 1
      , hyderabad
      Reviewed on Feb 15, 2019
    • DHFL Home Loan
      "Average"
      0.5 2.0/5 "Expected more"
      I took a home loan from the DHFL FINANCIAL INSTITUTION . I got the loan with in few days. The application process and the documentation was not so easy and i am not that satisfied with their services . Loan amount what they gave was satisfactory . The tenure period is 12years .
      Was this review helpful? 0
      , mumbai
      Reviewed on Feb 15, 2019
    • review Home Loan
      "Interest rate should be economical"
      0.5 4.0/5 "Great!"
      I purchase Residential plot , the owner got tie up with the canfin homes, the interest rate is higher around 12% its a floating percentage, I took the amount of Rs. 11 lakhs for the duration of 10 years. Now recently they have reduced the interest rate . Post process was not good after the loan product.
      Was this review helpful? 1
      , bangalore
      Reviewed on Feb 15, 2019
    • DHFL Home Loan
      "Excellent Service"
      0.5 4.0/5 "Great!"
      I had taken this Home loan almost six months back and the experience with them so far has been quite good. The loan amount has been less than expected but it was fine and the interest rate with them has been nominal. There has not been any sort of additional charges which they had made so far.
      Was this review helpful? 3
      , bangalore
      Reviewed on Feb 14, 2019
    • Punjab National Bank Home Loan
      "Good service"
      0.5 4.0/5 "Great!"
      I have been using home loan with punjab national bank . They have given me sufficient loan amount,like based on my requirement they have given me loan. and the rate of interest they have charged me was nominal,they have charged me up to 10.25% previously and now how much they are charging i have no idea, as the rate of interest is not fix.and the processing fee they have charged me was nominal, still this loan is running next year it will be completed.
      Was this review helpful? 1
      , hyderabad
      Reviewed on Feb 14, 2019
    • Standard Chartered Bank Home Loan
      "Easy process"
      0.5 5.0/5 "Blown Away!"
      My home loan is with Standard Chartered Bank. There were no hassles in the process. The documentation process is good. The rate of interest and processing charges is also fine. It is a floating rate. It has been a good process and I got the loan on time.
      Was this review helpful? 2
      , ahmedabad
      Reviewed on Feb 14, 2019
    • IDBI Home Loan
      "Average service"
      0.5 3.0/5 "Satisfactory"
      I am holding my housing loan with IDBI bank .The loan amount they have given me was good previously,like it was sufficient based on my requirement ,and again i ask them to extended up to 3,00,000 they did not increase ,they said my credit score is not sufficient for taking more loan.they have given me up to 2.5 crore, ,and i took loan from 2004 and in 2014 i ask them for 3,00,000 but they did not increase ,the rate of interest they have charged me up to 10.25% ,it is floating on market value,they have charged me nominal rate of interest,and the processing fee was very nominal, still this loan is running.
      Was this review helpful? 1
      , bangalore
      Reviewed on Feb 13, 2019
    • review Home Loan
      "Best service"
      0.5 5.0/5 "Blown Away!"
      BAJAJ FINANCE INSTITUTION has also offered me a home loan. The process was quick and I got the loan on time. The rate of interest is and there were processing charges as well both are very nominal compare to others in the market . The tenure period is 15 year and it is sufficient .
      Was this review helpful? 2
      , chennai
      Reviewed on Feb 13, 2019
    • Indiabulls Home Loan
      "GOOD"
      0.5 4.0/5 "Great!"
      I have taken the housing loan with the INDIABULLS but they have given the rate of interest higher when compared to the others but they have provided the satisfactory loan amount on time. I am using it since from last 1.5 years. The rate of interest is floating.
      Was this review helpful? 1
      , hyderabad
      Reviewed on Feb 13, 2019
    • HDFC Limited Home Loan
      "Good service"
      0.5 4.0/5 "Great!"
      My home loan experience was good with HDFC LTD, the loan amount was based on my requirement and the rate of interest was nominal when compared to others. Customer service was good and they followed up on time. Tenure period for this loan is for 20 years.
      Was this review helpful? 2
      , visakhapatnam
      Reviewed on Feb 13, 2019
    • HDFC Limited Home Loan
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      I had taken this loan almost three years back and the process in getting this loan was quite good and there hasn't been any delay in getting this loan. The loan amount was sufficient and the interest rate was also nominal. The processing fee was not too high and their customer support has also been helpful.
      Was this review helpful? 3
      , bangalore
      Reviewed on Feb 13, 2019
    • HDFC Limited Home Loan
      "Good service"
      0.5 4.0/5 "Great!"
      I have been applied for home loan with HDFC LTD.Their service is good, the loan amount they have given me was sufficient, and the rate of interest they have charged me up to 8.85%, it was nominal,it not be fixed,based on market rate it use to float, and the processing fee they have charged me was nominal, the loan was on time.
      Was this review helpful? 1
      , hyderabad
      Reviewed on Feb 13, 2019
    • HDFC Limited Home Loan
      "Good"
      0.5 4.0/5 "Great!"
      I took a home loan from HDFC LTD and much convenient with them. Its still ongoing and the loan tenure was 20 years. I have purchased a residential property. There was no processing fee and the rate of interest is currently high when compared to other banks.
      Was this review helpful? 3
      , mumbai
      Reviewed on Feb 13, 2019
    • Indiabulls Home Loan
      "Good Service"
      0.5 3.5/5 "Pretty good"
      I have applied for Indiabulls Home loan for the tenure of 13yrs and the loan amount sanctioned on the stipulated time and the agent clearly explained about the process completely ,got the interest rate on Floating basis while submitting documents not yet faced any difficulties ,there service is good and the processing time is also good and also not yet faced any difficulties on EMI basis ,there Overall service was good and satisfactory.
      Was this review helpful? 1
      , mumbai
      Reviewed on Feb 12, 2019
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