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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.

    Perfect Home Loan Deals for you

    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.

    Plot Loan Reviews

    • UCO Home Loan
      "Process is nice"
      0.5 4.0/5 "Great!"
      My home loan is good with UCO Bank. The customer services are good and they are responsive too. The rate of interest and processing charges is normal. The after loan services is also good. The documentation process is also good. I am happy with the services.
      Was this review helpful? 0
      , greater noida
      Reviewed on Sep 20, 2018
    • Punjab National Bank Home Loan
      "Fast process"
      0.5 5.0/5 "Blown Away!"
      I have taken my home loan with Punjab National bank. The customer services are good and they are responsive as well. The rate of interest and processing charges is normal. The process to get this loan was good and on time. It is hassle free overall.
      Was this review helpful? 1
      , noida
      Reviewed on Sep 19, 2018
    • IDBI Home Loan
      "Best Service"
      0.5 5.0/5 "Blown Away!"
      My home loan experience was good with IDBI bank, the loan amount was for Rs 50 lacs with nominal interest rate when compared to others.Customer service was good with this bank and they responded on time. There was no processing fee charged and no preclosure charges.
      Was this review helpful? 0
      , mumbai
      Reviewed on Sep 19, 2018
    • Axis Bank Home Loan
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      It has been a very good experience i had with this home loan from AXIS and the services had been good. The loan amount which they had provided had been good and the interest rate with them had been good when compared with the market rate. Their customer support and their staff responses also had been good as well.
      Was this review helpful? 1
      , visakhapatnam
      Reviewed on Sep 17, 2018
    • Bank Bazaar Home Loan
      "EASY STEPS!!!!!"
      0.5 5.0/5 "Blown Away!"
      Nice to know your requirement and very good application app is and the system of application is also very good your apps very use full every one. Now we also knowing about which type of loan we will get bank are involved in your bank bazaar .com will provide loans for us too.
      Was this review helpful? 2
      , bangalore
      Reviewed on Sep 16, 2018
    • Axis Bank Home Loan
      "Experience is good"
      0.5 5.0/5 "Blown Away!"
      Axis Bank has also offered me a home loan and the customer services and response is good. There are no issues in the process. They have given me a good deals of 6%. There were no processing charges for the loan as I am an employee of the bank, I get these benefits.
      Was this review helpful? 1
      , mumbai
      Reviewed on Sep 15, 2018
    • HDFC Limited Home Loan
      "Excellent"
      0.5 5.0/5 "Blown Away!"
      It is a excellent process with HDFC LTD. I have done a balance transfer for my home loan. The process is good and there are no issues in the experience. The rate of interest and processing charges is normal and that is the main reason I shifted to this institution.
      Was this review helpful? 0
      , secunderabad
      Reviewed on Sep 15, 2018
    • Indian Bank Home Loan
      "Average"
      0.5 3.0/5 "Satisfactory"
      I have taken a home loan from Indian Bank. The process to get the loan was delayed and the process to close the loan was also a delay. It has not been a very satisfactory experience and the process was not that smooth. I finally transferred my loan to another bank.
      Was this review helpful? 1
      , secunderabad
      Reviewed on Sep 15, 2018
    • YES Bank Home Loan
      "Worst Service by Yes Bank - Strictly Avoid Yes bank"
      0.5 1.5/5 "Bad"
      I personally recommend not to take any loan service from Yes Bank. Their team believes in giving 'no reply' to customer. I am eligible for Interest Subsidy, but still not received it after 9 months. Bank is not helping in anyway and just making bluffs. Plz Avoid.
      Was this review helpful? 2
      , new delhi
      Reviewed on Sep 15, 2018
    • LIC Housing Home Loan
      "Harrasment of LIC HFL"
      0.5 0.5/5 "Unacceptable"
      Donot take loan from LIC HFL, they are not good, Lot of Hidden charges and no Support / Service if any query. After loan clearance they are not providing documents, even not replying the Emails, So lot of harassment in the LIC HFL So please donot apply loan in LIC HFL also inform to all your friends and relatives.
      Was this review helpful? 1
      , mumbai
      Reviewed on Sep 15, 2018
    • ICICI Bank Home Loan
      "Satisfactory"
      0.5 4.0/5 "Great!"
      I have taken my home loan with ICICI bank 12 years back. The loan amount was 30 lakhs and the interest rate was satisfactory . The tenure period was 30 year . .There is no issues with the service here and it was quite smooth also. They have sanctioned the loan with the committed time,
      Was this review helpful? 1
      , mumbai
      Reviewed on Sep 14, 2018
    • HDFC Limited Home Loan
      "Good service"
      0.5 4.0/5 "Great!"
      I have taken home loan with HDFC LTD and my experience was good, the process was smooth and i received my loan amount on time. The loan amount was for Rs 20 lacs with nominal interest rate and with the tenure period of 15 years. Customer service was good and they responded on time.
      Was this review helpful? 1
      , mumbai
      Reviewed on Sep 14, 2018
    • Bank Bazaar Home Loan
      "HOME"
      0.5 5.0/5 "Blown Away!"
      Nice to know your requirement and very good application app is and the system of application is also very good your apps very use full every one. Now we also knowing about which type of loan we will get bank are involved in your bank bazaar .com will provide loans for us too.
      Was this review helpful? 0
      , mumbai
      Reviewed on Sep 12, 2018
    • HDFC Limited Home Loan
      "Best Service"
      0.5 5.0/5 "Blown Away!"
      I have taken a home loan from HDFC LTD and my experience was good, the loan amount was for Rs 80 lacs with nominal interest rate when compared to others in the market. Customer service was good and they responded on time. The tenure period for this loan is 20 years.
      Was this review helpful? 3
      , hyderabad
      Reviewed on Sep 12, 2018
    • Bank Bazaar Home Loan
      "Home Loan review"
      0.5 5.0/5 "Blown Away!"
      BankBazaar is user friendly application and easy to understand, very informative and compares many products in one screen. Instant information and helps to plan easily. Secured application. Will recommend this application to my friends as well.
      Was this review helpful? 4
      , bangalore
      Reviewed on Sep 12, 2018
    • DHFL Home Loan
      "Good Service"
      0.5 5.0/5 "Blown Away!"
      I have taken a home loan from the DHFL for 17 Lacs, the interest rate was 8.5 and in par with the market rate. I got the loan with in 20 days after thorough documentation and processing. It was a hassle free application process.
      Was this review helpful? 4
      , lucknow
      Reviewed on Sep 11, 2018
    • SBI Home Loan
      "Excellent process"
      0.5 5.0/5 "Blown Away!"
      I have taken a top up loan on the home loan with State Bank of India. The process was also good. This time I was given the rate of interest of 8.4%. The processing charges are normal too. The after loan services and good too. In all no hassles overall.
      Was this review helpful? 2
      , nagpur
      Reviewed on Sep 11, 2018
    • SBI Home Loan
      "Satisfactory"
      0.5 5.0/5 "Blown Away!"
      My home loan is with State Bank of India. The customer services are good. The rate of interest is of 10.00% and the processing charges are normal. The process was good but it is on the slow side. The after loan services are good too. In all no issues.
      Was this review helpful? 4
      , nagpur
      Reviewed on Sep 11, 2018
    • SBI Home Loan
      "Average"
      0.5 3.0/5 "Satisfactory"
      My home loan was taken with SBI 3 years back.The loan amount was 20 lakhs and the interest rate was 8.35% which is satisfactory . Their customer service and responses was not up ti the mark but the loan process was very smooth . They have sanctioned the loan with the committed time here.
      Was this review helpful? 12
      , mumbai
      Reviewed on Sep 07, 2018
    • Indiabulls Home Loan
      "Satisfactory"
      0.5 4.0/5 "Great!"
      I have taken my home loan with IndiaBulls. The customer services are good. I got a good response as well. The rate of interest and processing charges are normal. In all it has been a good experience and the after loan services are also hassle free.
      Was this review helpful? 7
      , mumbai
      Reviewed on Sep 07, 2018
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