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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

    • review Home Loan
      "Good"
      0.5 5.0/5 "Blown Away!"
      I have my home loan with GIC housing finance. The loan amount was 25 lakhs taken for 20 years .The promised rate of interest was 12% which was very high. Here the pre clouser is very easy and the loan process is very simple .They have sanctioned the loan with the committed time. My overall experience was good.,
      Was this review helpful? 0
      , jaipur
      Reviewed on Oct 21, 2017
    • Bank Bazaar Home Loan
      "Better"
      0.5 3.0/5 "Satisfactory"
      My experience with bank bazaar was not satisfactory. When I approached bank bazaar for some products, my application did not go through because of the low credit score. however the same was processed by the bank it would be better if the above mentioned thing has been taken care off. On the other hand, The followups were good. As far the site is concerned it is easy to use.
      Was this review helpful? 0
      , secunderabad
      Reviewed on Oct 21, 2017
    • Axis Bank Home Loan
      "Need proper response"
      0.5 4.0/5 "Great!"
      I have approached Axis bank for my home loan through online channel. My property was not finalized hence my application has been cancelled. The customer service is good but there were no proper followups from the bank. The rate of interest is also high.
      Was this review helpful? 0
      , secunderabad
      Reviewed on Oct 21, 2017
    • Bank Bazaar Home Loan
      "Good Customer Service"
      0.5 5.0/5 "Blown Away!"
      As per Bank Bazaar commitment, I have service value added coupon worth Rs.5000 its amazing and happy about it. The home loan process was also good they connected with the bank on it. I have been using Bank Bazaar for four years its good site it has all option rather visiting to the branch.
      Was this review helpful? 0
      , pune
      Reviewed on Oct 21, 2017
    • ICICI Bank Home Loan
      "They should be transparent in their process"
      0.5 4.0/5 "Great!"
      Everything is good in ICICI , expect the charges. They told they were not charging me extra, but they have 7000 to 8000 rupees from the disbursement as a processing fee. I have taken home loan of Rs. 22 lakhs for the tenure of 30 years but they have foreclosure option without any charges can close the loan.
      Was this review helpful? 0
      , pune
      Reviewed on Oct 21, 2017
    • Bank Bazaar Home Loan
      "User friendly website"
      0.5 5.0/5 "Blown Away!"
      My service with bankbazaar.com is better. Last time I got a good response so I have continued the service for my home loan. The response was quick and good. The website was easy to use and navigate. I would recommend this website to my friends and family members.
      Was this review helpful? 0
      , chennai
      Reviewed on Oct 21, 2017
    • Axis Bank Home Loan
      "Good"
      0.5 4.0/5 "Great!"
      Axis bank is doing a good customer service. I have taken an amount of 9lakhs and 59K at the interest rate of 8.35%,interest rate is nominal. The executive collected the documents at the doorstep. They took long time to process my application.I make the payment through ECS.
      Was this review helpful? 0
      , chennai
      Reviewed on Oct 21, 2017
    • HSBC Bank Home Loan
      "Customer relationship should be there"
      0.5 4.0/5 "Great!"
      I am not satisfied with HSBC, I felt their rate of interest and charges was high. I took home loan at 2012, they charged me 9.2% and their was no response from customer response. They didn't reverse the interest after getting offer DBS bank, they ready to reduce the rate. But finally I done balance transfer to DBS.
      Was this review helpful? 0
      , pune
      Reviewed on Oct 21, 2017
    • Bank Bazaar Home Loan
      "Userfriendly"
      0.5 5.0/5 "Blown Away!"
      I got immediately call and response from Bank Bazaar, I am 100% satisfied with them. I keep getting continuous follow thorough out the process. They connected with the bank on time, I am using online interface, its pretty easy to navigate and user friendly, what I need I could it over there.
      Was this review helpful? 0
      , pune
      Reviewed on Oct 21, 2017
    • DBS Bank Home Loan
      "Looking for the better offer"
      0.5 3.0/5 "Satisfactory"
      DBS is really nice bank they offering good interest rate for the home loan. But relationship manger was not coordinated well with me . They taken almost two months to process the loan. They need to improve the service and documentation procedure should be faster and should provide loan letter to the customer on time.
      Was this review helpful? 0
      , pune
      Reviewed on Oct 21, 2017
    • Bank Bazaar Home Loan
      "Better Experience"
      0.5 4.5/5 "Excellent!"
      I have taken a home loan through bankbazaar.com. I know this website through social media. I had regular followups from the customer service. The website is related to fin-tech products and very helpful to the customers. The website was easy to access and navigate.
      Was this review helpful? 0
      , delhi
      Reviewed on Oct 21, 2017
    • HDFC Limited Home Loan
      "Good service"
      0.5 4.5/5 "Excellent!"
      I have a home loan from HDFC LTD and the process was good. The executive came to my place to collect the documents. The disbursement was on time.They have released the payment in a single shot. I am happy with the rate of interest. Overall it was a good service.
      Was this review helpful? 0
      , delhi
      Reviewed on Oct 21, 2017
    • Bank Bazaar Home Loan
      "Excellent"
      0.5 4.0/5 "Great!"
      This is my first experience with Bank bazaar. I am pretty satisfied with the service and responsiveness which was immediate and quick. Its a good platform for all financial products and Its recommendable also, The options like EMI calculator and FD calculator is very usefull. My overall experience was excellent.
      Was this review helpful? 0
      , pune
      Reviewed on Oct 21, 2017
    • HDFC Limited Home Loan
      "satisfied"
      0.5 4.0/5 "Great!"
      I have approached for my home loan with HDFC LTD. Their rate of interest was 8.5% for 30 lakhs loan amount . The customer service and responsiveness was satisfactory. I have canceled the request since there was no immediate requirement as of now so just enquired.
      Was this review helpful? 0
      , pune
      Reviewed on Oct 21, 2017
    • Bank Bazaar Home Loan
      "GOOD SERVICE"
      0.5 5.0/5 "Blown Away!"
      As a first time user it was a good experience with bank bazaar . The customer service was really amazing from the bank bazaar side . Within an hour I registered myself received the call from bank bazaar side and the executive explained me everything in detailed i like it actually and also website was good and user friendly .
      Was this review helpful? 0
      , delhi
      Reviewed on Oct 21, 2017
    • HDFC Limited Home Loan
      "BETTER ONE"
      0.5 4.0/5 "Great!"
      It was good customer service from the HDFC ltd side for the loan I rarely received the call from the HDFC ltd. the rate of interest provided was too high of 11% and also the processing fee they told about was rs 3,500 . I actually arranged the money from the my sources so did not take it .
      Was this review helpful? 0
      , delhi
      Reviewed on Oct 21, 2017
    • ICICI Bank Home Loan
      "BETTER SERVICE"
      0.5 5.0/5 "Blown Away!"
      Its been only a month I took a home loan from the ICICI BANK and customer service was actually great from their side as they gave me a rate of interest of 835% and processing fee charged as rs 3200 and also I got a full approval of the amount was given to me . It was a good experience I can say for this process .
      Was this review helpful? 0
      , nagpur
      Reviewed on Oct 21, 2017
    • Bank Bazaar Home Loan
      "BEST SERVICE"
      0.5 5.0/5 "Blown Away!"
      BANK BAZAAR is actually doing a wonderful job helping out the customer at its best . The customer service is great i received call within a day and the executive explained me everything in detailed manner which makes it easy for me to understand . The website was actually very user friendly for me easy to compare options and pick the best one .
      Was this review helpful? 0
      , nagpur
      Reviewed on Oct 21, 2017
    • Punjab National Bank Home Loan
      "GOOD"
      0.5 4.0/5 "Great!"
      The customer service was real good from the PNB Housing Finance . I meet the bank executive personally for the loan process and they gave me the information I required for . The rate of interest was about 8.35% which was good but the processing fee was about rs 5,000 every thing was good only , the builder helped me for the loan process from some other bank therefore I did not take the loan .
      Was this review helpful? 0
      , nagpur
      Reviewed on Oct 21, 2017
    • Bank Bazaar Home Loan
      "GOOD ONE"
      0.5 5.0/5 "Blown Away!"
      Bank Bazaar helped me out in a proper way . The customer service was really good and every thing was explained to me in detailed as it was my first time with bank bazaar , i was applying for something through your portal . It was a good experience and the website was real user friendly for me to use I liked it .
      Was this review helpful? 0
      , nagpur
      Reviewed on Oct 21, 2017
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