A "low interest" loan shouldn't mean you have very little interest in paying it back!
  • 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

    • HDFC Limited Home Loan
      "Not satisfactory"
      0.5 4.0/5 "Great!"
      I took a home loan with HDFC LIMITED and its been completed now. Whenever I want to reduce my EMI as per Government ROI and they have been charging money from customer which is not good. I have paid Rs.3000 and secondly paid Rs.2300 in 8 years period. Actually they should reduce ROI as per changes in Government without any charges where SBI is not charging.
      Was this review helpful? 1
      , new delhi
      Reviewed on Jul 20, 2019
    • HDFC Limited
      Bank Bazaar Home Loan
      "Customer friendly"
      0.5 4.0/5 "Great!"
      From bankbazaar, we can check our eligibility for applying the loan and we no need to ask with anyone. Bankbazaar people are calling me once i visit the website for any particular product and helping out the customer based on their query. I come to know about the website from Social media.
      Was this review helpful? 0
      , mumbai
      Reviewed on Jul 20, 2019
    • HDFC Limited Home Loan
      "Customer friendly"
      0.5 5.0/5 "Blown Away!"
      Since the rate of interest is less i have chosen the home loan with HDFC. They have provided me a interest rate of 8.60% for the loan amount of Rs. 15 years. I chose the tenure period of 20 days. Documentation process was quite smooth. I checked my eligibility through online.
      Was this review helpful? 0
      , mumbai
      Reviewed on Jul 20, 2019
    • Dena Bank Home Loan
      "Good Service"
      0.5 5.0/5 "Blown Away!"
      I have taken Home loan through Dena Bank since builder referred this Bank .I have got all the required details about the loan process ,I have applied for the loan amount of 15 lakh for the tenure of 15 years ,The rate of interest and the processing fee was quite nominal ,Still the loan is active and the agent gave all the information about the card process .
      Was this review helpful? 0
      , pune
      Reviewed on Jul 20, 2019
    • SBI Home Loan
      "Above Average"
      0.5 5.0/5 "Blown Away!"
      I took a home loan with State Bank of India mainly for the interest rate which is 8.77%. Its almost going to be a year and the loan tenure is 30years. I have purchased a residential property. There is no hassle in processing the loan and it went smoothly.
      Was this review helpful? 0
      , chennai
      Reviewed on Jul 20, 2019
    • HDFC Limited Home Loan
      "Should provide privilege benefits"
      0.5 3.0/5 "Satisfactory"
      HDFC Limited unable to give the top up loan for the property construction since I am an existing customer. I took the total outstanding of Rs.24.80 with the duration of 20 years. The loan process was not user friendly, they multiple documents was there and I paid the charges for the loan formalities. Hence I moved to Bajaj Finserv.
      Was this review helpful? 1
      , ghaziabad
      Reviewed on Jul 19, 2019
    • Bajaj Finserv Home Loan
      "Charges should be reasonable"
      0.5 5.0/5 "Blown Away!"
      My home loan is running Bajaj Finserv, the interest rate is good around 8.90 for per annum its a floating one, the process was very good and quick. I took the loan amount of Rs. 30 lakhs for the duration of 15 years. They do have balance transfer, part payment option. I done the balance transfer from Hdfc limited to Bajaj Finserv. But the cheque bounce charges are more they are taking Rs.3000 per transaction.
      Was this review helpful? 0
      , ghaziabad
      Reviewed on Jul 19, 2019
    • DHFL Home Loan
      "NOT SATISFIED"
      0.5 1.0/5 "Really Bad"
      I am not satisfied with the loan because i have submitted all of the documents but i have not received the 3rd dispersal amount which is almost many months past. The loan amount was 10.70L, the rate of interest was 8.5%, the customer support is not good. The duration for repaying the loan was 15years.
      Was this review helpful? 0
      , bangalore
      Reviewed on Jul 19, 2019
    • review Home Loan
      "Excellent Loan services"
      0.5 5.0/5 "Blown Away!"
      Since my friend has recommended me about the EDEL WEISS for the home loan purpose. They have given me a interest rate of 10.5%. I have applied the loan amount of Rs. 25 lakhs and they have sanctioned the loan in 4 days and its a very good company for home loan. Even difficult profile customer can get the loan from here. There was a easy documentation process.
      Was this review helpful? 0
      , chennai
      Reviewed on Jul 19, 2019
    • DHFL Home Loan
      "Service is not up to the mark"
      0.5 1.0/5 "Really Bad"
      I came to know about the DHFL loan i went direct to the office and collected form and applied for it. I wish to say that their service is not up to the mark. They just want the client to apply and want to achieve their target and they keep on changing their rate of interest was application was submitted.
      Was this review helpful? 0
      , pune
      Reviewed on Jul 19, 2019
    • Axis Bank Home Loan
      "Excellent"
      0.5 5.0/5 "Blown Away!"
      I was offered with Axis bank Housing Finance Loan with the nominal rate of interest of 8.5% . I have applied for 16 lakh but they offered me up to 20 lakh which makes me more satisfy. There documentation was done very smooth and staff were very responsive all went good.
      Was this review helpful? 1
      , pune
      Reviewed on Jul 19, 2019
    • SBI Home Loan
      "It can be better"
      0.5 4.0/5 "Great!"
      I took a home loan with SBI and its been 3 years. I have purchased a residential property. There was a delay in the loan process because the bank person is on leave so it took more than 30 days for the approval. The interest rate and processing fee is nominal. I opted the loan for 30 years.
      Was this review helpful? 1
      , gurgaon
      Reviewed on Jul 19, 2019
    • Bank Bazaar Home Loan
      "Nice service "
      0.5 4.5/5 "Excellent!"
      Bank bazaar is a best opportunities for loan and all insurance .......................................................................................................................................................
      Was this review helpful? 0
      , mumbai
      Reviewed on Jul 18, 2019
    • review Home Loan
      "Need to decrease charges "
      0.5 2.0/5 "Expected more"
      I have taken a home loan in MAHINDRA HOME FINANCE for more than 4 years before. The loan amount sufficient which was given from bank for the tenure of 5 years. The process was smooth. On time loan got sanctioned. But the rate of interest and fee are high. Cheque got bounce for twice then went directly to bank to pay the money. Due amount was detected from my account without any intimation.
      Was this review helpful? 0
      , coimbatore
      Reviewed on Jul 18, 2019
    • Bank Bazaar Home Loan
      "Very Active Service"
      0.5 3.5/5 "Pretty good"
      Quick response to the customer Facility is very good by Bank Bazar. Very Good Service. I can not believe that home loan will be applied so fat but bankbazar.com find it hassel free and made my loan fast. I check my credit score daily by the link sent by Bankbazar.com.
      Was this review helpful? 0
      , dehradun
      Reviewed on Jul 18, 2019
    • HDFC Limited Home Loan
      "Good Loan provider"
      0.5 4.0/5 "Great!"
      I got the HDFC bank home loan 10 years back at the time the team was very good and now the service is not upto the mark. At the time, the HDFC was there which was provided the home loan on easy basis and the loan tenure is going to over in next 3 years. They have sanctioned the loan in one month. They took shortest time to provide the loan.
      Was this review helpful? 0
      , dehradun
      Reviewed on Jul 18, 2019
    • HDFC Limited Home Loan
      "Good"
      0.5 4.5/5 "Excellent!"
      I have taken a home loan in HDFC bank for more than 4 years ago which was applied through an other channel. The loan amount was sufficient for the tenure of 20 years. On time loan got sanctioned and the process was good. The rate of interest and processing fee are okay.
      Was this review helpful? 2
      , thane
      Reviewed on Jul 16, 2019
    • SBI Home Loan
      "Need to be process at earlier"
      0.5 3.0/5 "Satisfactory"
      I was taken a home loan in STATE BANK OF INDIA before 10 years ago. At the time they have asked so many documents to submit for a verification purpose and the process was too long faced difficulties to complete the process took 2-3 months to get sanctioned. The loan was low for the tenure of 10 years. The rate of interest and fee are nominal.
      Was this review helpful? 2
      , amravati
      Reviewed on Jul 16, 2019
    • HDFC Limited Home Loan
      "Not Satisfied with the Service"
      0.5 3.0/5 "Satisfactory"
      I have applied for HDFC LTD Home Loan through Online .I have not got any information about the loan process through the agent ,I have not got any information about the rate of interest and the processing fee .I have not taken this loan since there was no proper response and not satisfied with the service .
      Was this review helpful? 0
      , kolkata
      Reviewed on Jul 16, 2019
    • DHFL Home Loan
      "Nice service"
      0.5 4.0/5 "Great!"
      This is bond process hence they have completed all the process within 1 week. They have delivered the cheque very fast. I have taken my home loan from DHFL. They have charged me a interest rate of 9% and its a zero processing fee. I have chosen the tenure period of 20 years and their service has been prompt.
      Was this review helpful? 0
      , chennai
      Reviewed on Jul 16, 2019
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