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  • 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
      "Easy to apply loan"
      0.5 3.5/5 "Pretty good"
      I have applied a Home loan through online. My application canceled by HDFC Limited because my net salary is Rs. 25k they said its not sufficient for the loan approval. Customer service was not so good, not so bad, it is average. I think, the rate of interest was 8-10%.
      Was this review helpful? 0
      , jaipur
      Reviewed on Dec 11, 2019
    • DHFL
      DHFL Home Loan
      "Quick approval loan"
      0.5 3.0/5 "Satisfactory"
      I have taken a housing loan from DHFL and the loan amount of Rs. 10,50,000 for the rate of interest of 9.8%. I am paying the EMI amount of Rs. 8500 for the tenure period of 15 years since its plot cum construction loan. Bank itself approved a loan within 3 days.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Dec 11, 2019
    • LIC Housing Home Loan
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      I have taken home loan directly through LIC Housing Finance .The rate of interest and the processing fee was quite nominal .This loan was sanctioned on exact time frame without any delay.This loan is still active and i have submitted the required documents as well .If EMI is paid on delay basis there will be extra charges.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Dec 10, 2019
    • SBI Home Loan
      "Easy loan"
      0.5 5.0/5 "Blown Away!"
      I have taken a home loan from SBI and the loan amount was Rs. 30 lakh. The rate of interest was 8.15% and i am paying EMI of Rs. 25k. Customer service was good. I received this loan instantly and i applied this loan through online channel.There is no pre closure charges.
      Was this review helpful? 2
      , pune
      Reviewed on Dec 09, 2019
    • Muthoot Homefin Home Loan
      "Good Finance"
      0.5 5.0/5 "Blown Away!"
      I have taken a home loan in MUTHOOT HOMEFIN LIMITED on one year before. The amount was offered of 6L which was sufficient as per my requirement. The tenure period of 7 years. My friend has suggested this finance to apply a loan. The process was smooth and sanctioned the loan within 15-20 days. Interest is nominal. Pre closure is applicable and part payment can be done of above 50K. It is nominal to pay for EMI.
      Was this review helpful? 0
      , chennai
      Reviewed on Dec 09, 2019
    • ICICI Bank Home Loan
      "Instant loan approval"
      0.5 5.0/5 "Blown Away!"
      I had applied for a home loan with ICICI Bank. They have taken my documentation and also completed the verification as well. The loan amount was Rs. 8.75 lakhs and the rate of interest was 8.6% i am happy with the interest.I received this loan instantly and i applied this loan through online channel.There is no pre closure charges.
      Was this review helpful? 1
      , jaipur
      Reviewed on Dec 09, 2019
    • HDFC Limited Home Loan
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      I have taken Home loan directly through HDFC LTD .The loan amount was sanctioned on time without any delay .The agent shared all the details about the loan process ,I have submitted the required documents on time ,This loan is still active and there was difficulties faced so far .The loan tenure is for 5 years ,i have completed 1 year successfully and need to pay EMI for another 4 years.
      Was this review helpful? 3
      , nasik
      Reviewed on Dec 07, 2019
    • HDFC Limited Home Loan
      "Good Service"
      0.5 5.0/5 "Blown Away!"
      I have taken home loan directly through HDFC LTD .The rate of interest was 8.25% it was nominal and all the details aboput the loan process was clearly explained by the agent .I have submitted the documents through the agent.I have got the loan amount sanctioned on time .I am satisfied with the service so far .
      Was this review helpful? 2
      , thiruvananthapuram
      Reviewed on Dec 05, 2019
    • HDFC Limited Home Loan
      "Best Service"
      0.5 5.0/5 "Blown Away!"
      I have taken Home loan directly through HDFC Ltd.The rate of interest and the processing fee was nominal .The loan amount got on time and there was no difficulties .This loan is still active and paying the premium through EMI basis without any hassle got this loan .I am completely satisfied with the service .
      Was this review helpful? 1
      , pune
      Reviewed on Dec 05, 2019
    • Oriental Bank of Commerce Home Loan
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      I have taken home loan directly from Oriental Bank Of commerce .The rate of interest and the processing fee was very nominal,I have got the loan amount sanctioned on time ,There was no drawbacks faced so far on using this service .From bank end all t he detail was shared and i am satisfied with the service .
      Was this review helpful? 3
      , gurgaon
      Reviewed on Dec 01, 2019
    • HDFC Limited Home Loan
      "Need to decrease the rate of interest"
      0.5 5.0/5 "Blown Away!"
      I had applied for a home loan with HDFC Limited. The loan amount was Rs. 22,00,000 and the rate of interest was 8% when i was applied , but now it increased to 9.4% need to work in rate of interest. I am paying Emi monthly Rs. 18,500 and the tenure was 18 years. They have taken my documentation and also completed the verification as well executive supported me very nicely.
      Was this review helpful? 3
      , coimbatore
      Reviewed on Nov 29, 2019
    • review Home Loan
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      I have taken home loan directly through Home First Finance company India Pvt ltd.I have got the loan on time and the rate of interest was nominal .The documents was less and the agent clearly explained the loan process very clearly . This loan s still active and paying the premium.
      Was this review helpful? 1
      , jaipur
      Reviewed on Nov 28, 2019
    • ICICI Bank Home Loan
      "Good Service"
      0.5 5.0/5 "Blown Away!"
      I have taken home loan directly through ICICI Bank.The rate of interest and the processing fee was medium.I have got the loan sanctioned on time .The documents was very less and each and every detail was shared clearly by the agent .This loan is still active and there was no difficulties faced so far.
      Was this review helpful? 2
      , salem
      Reviewed on Nov 26, 2019
    • DHFL Home Loan
      "Average Service"
      0.5 2.0/5 "Expected more"
      I have taken home loan directly through DHFL .The rate of interest and the processing fee was very high since had a requirement at that time taken this loan .This loan is still active and the loan got sanctioned on time .There was proper callback and follow up as well.Everything was ok but the service was average according to my point of view.
      Was this review helpful? 1
      , ahmedabad
      Reviewed on Nov 26, 2019
    • Union Bank of India Home Loan
      "Not Satisfied"
      0.5 5.0/5 "Blown Away!"
      I have taken home loan which was taken directly through Union Bank of India .The rate of interest was less it was 8.5% and still this loan is active .I have got the loan amount without any delay .All the required details about this loan was shared by the agent. According to me the service is not satisfied .
      Was this review helpful? 3
      , cuttack
      Reviewed on Nov 25, 2019
    • Axis Bank Home Loan
      "Good Service"
      0.5 4.5/5 "Excellent!"
      I have taken home loan directly through Axis Bank .The rate of interest and the processing fee was nominal and the got the loan amount on exact time frame .I am paying the premium through EMI basis .All the detail about the loan process was clearly shared by the agent .I have submitted the required documents and the process was really satisfied .
      Was this review helpful? 2
      , chennai
      Reviewed on Nov 23, 2019
    • IIFL Home Loan
      "Good Service"
      0.5 4.0/5 "Great!"
      I have taken India Infoline Housing Finance Limited directly .I have got the loan on delay basis it took 2 months of time and not got the reason for the delay .This loan is still active and there was no callback and follow up from India infoline .I have submitted the required documents and there was no drawbacks faced so far.
      Was this review helpful? 4
      , new delhi
      Reviewed on Nov 23, 2019
    • BAJAJ HOUSING FINANCE LIMITED HOME LOAN Home Loan
      "Misleading & dangerous"
      0.5 0.5/5 "Unacceptable"
      Bajaj Housing Finance tries all tricks to loot me - 1. Just before disbursement day, they hiked the Processing fee and increased the interest rate 2. After EMI stated, they suddenly hiked the EMI for one month by 20,000 due to a system issue at their end. 3. They arbitrarily deduct charges from your bank account in small amounts without telling and authorizations and randomly through a month. 4. Customer service and its Head are completely nonchalant and they fake ignorance. 5. It takes 5-6 months to resolve one issue. By that time, they will create another issue and you spend the next 5 months chasing them for its resolution. Beware the NBFCs for housing finance. Its always better to go to the leading banks.
      Was this review helpful? 1
      , kolkata
      Reviewed on Nov 23, 2019
    • HDFC Limited Home Loan
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      I have applied for Home loan directly through HDFC Limited .The rate of interest was very less it is only 8.35 or 8.55% criteria but i am not sure about the exact percentage .The premium is paid on EMI basis and got the loan amount on time and not faced any difficulties .I am totally satisfied with the service.
      Was this review helpful? 1
      , mumbai
      Reviewed on Nov 22, 2019
    • HDFC Limited Home Loan
      "HDFC is giving a good service"
      0.5 5.0/5 "Blown Away!"
      I have taken my home loan from HDFC Limited. Purchased my loan more than 5 years back. I got the loan amount of Rs. 20 lakhs and they have taken 3 months to sanctioned the loan and the delay from my side to provide the documents. I'm satisfied with the interest rate of 8.5%
      Was this review helpful? 3
      , malegaon
      Reviewed on Nov 21, 2019
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