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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.

    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.

    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

    Plot Loan Reviews

    • DHFL Home Loan
      "Very good"
      0.5 4.0/5 "Great!"
      I have my home loan with HDFC bank 2 years back.The loan amount was 16 lakhs and the interest rate was 8.5% which is average and the tenure period as 16 years . The customer service and responses was slow. Here the executives had no knowledge about the documents. They have taken much time and sanctioned the loan with the committed time.
      Was this review helpful? 0
      , coimbatore
      Reviewed on Apr 24, 2018
    • SBI Home Loan
      "Average"
      0.5 3.0/5 "Satisfactory"
      The service of Sbi home loan is good. The interest rate they quoted me was 8.35 %which is fine compared to others in the market. The documents process was been smooth with Sbi. Loan disbursement was been on time without any delay. It was an average service from Sbi home loan service.
      Was this review helpful? 0
      , chennai
      Reviewed on Apr 24, 2018
    • Bank Bazaar Home Loan
      "Amazing experience"
      0.5 4.5/5 "Excellent!"
      I am very pleased with the bank bazaar services in a one large place . This is an excellent opportunity to purchase your choice of financial services . It was the first time in my opinion on a regular visitor from the heart and the surrounding areas of interest .
      Was this review helpful? 0
      , pali
      Reviewed on Apr 24, 2018
    • IDBI Home Loan
      "Home loan with IDBI"
      0.5 5.0/5 "Blown Away!"
      I have taken home loan from IDBI bank the approved loan amount is 30 lakhs. The rate of interest was 11%. It will be deprecating after the installments. The monthly EMI is 30000 for 20 years. Its an independent house The process was very quick.
      Was this review helpful? 0
      , bangalore
      Reviewed on Apr 23, 2018
    • Bank Bazaar Home Loan
      "Excellent home loan bifurcation along with proper details ty"
      0.5 3.5/5 "Pretty good"
      It was very easy to identify the plan and everything just took 2 mins.hassel free smooth correct information proper verification. Also the cost effective of bankbazar and pnbhfl is also good. You just need to pay one time processing fee that's it
      Was this review helpful? 0
      , mumbai
      Reviewed on Apr 23, 2018
    • HDFC Limited Home Loan
      "Average service"
      0.5 3.0/5 "Satisfactory"
      I have got the home loan from the HDFC limited around 4 years ago. The customer support service is average with the HDFC LIMITED and thye need to be focused in their response part. I have got the loan amount in around 2 months time. The process is very long from the HDFC LIMITED . The rate of interest and the charges are high with the HDFC limited when compared with others.
      Was this review helpful? 0
      , bangalore
      Reviewed on Apr 23, 2018
    • Bank Bazaar Home Loan
      "GREAT"
      0.5 5.0/5 "Blown Away!"
      There were no hassles at Bank bazaar as well. I have taken my home loan through them and the process was smooth and easy. I was contacted on time and given the necessary details. The website is also good and informative and in all it was a convenient to get connected with the bank.
      Was this review helpful? 0
      , new delhi
      Reviewed on Apr 22, 2018
    • Axis Bank Home Loan
      "Good"
      0.5 3.0/5 "Satisfactory"
      I have my home loan with AXIS Bank which was taken 2.5 years back. The loan amount was 23 lakhs and the interest rate was 8.5% which is average . The tenure period was 15 years . The process was really good and the documentation process was really easy but The fees and charges are very high.
      Was this review helpful? 0
      , pune
      Reviewed on Apr 19, 2018
    • LIC Housing Home Loan
      "Good service"
      0.5 4.0/5 "Great!"
      I have taken a home loan with LIC HFL and my loan experience was good, the loan amount was for Rs 15 lakhs with nominal interest rate when compared to other sources. They 2% of the principal amount for preclosure. Customer service was good, they followed up on time and tenure of this loan is 20 years.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Apr 18, 2018
    • SBI Home Loan
      "Good experience"
      0.5 5.0/5 "Blown Away!"
      I have taken home loan from SBI and the approved loan amount is 20 lakhs. The interest for the approved loan amount is 8.2%. They do have pre-closure and part payment facility is available. The monthly EMI is 19200 which i have to pay for 20 years.
      Was this review helpful? 0
      , pune
      Reviewed on Apr 17, 2018
    • Karnataka Bank Home Loan
      "Best Service"
      0.5 4.5/5 "Excellent!"
      I have taken a home loan from Karnataka Bank and my loan experience was good. the loan amount was for Rs 17 lakhs with nominal interest rate when compared to other banks. There are no charges on preclosure and the customer service was good. The tenure period of this loan is 15 years.
      Was this review helpful? 0
      , new delhi
      Reviewed on Apr 17, 2018
    • LIC Housing Home Loan
      "Excellent"
      0.5 5.0/5 "Blown Away!"
      My home loan was taken with LIC which was taken 2 months back. The loan amount was 32 lakhs and the interest rate was 8.35% which is average .The customer service and responses was amazing ., The process was very good and the documentation was smooth .My overall experience was satisfactory .
      Was this review helpful? 0
      , lucknow
      Reviewed on Apr 17, 2018
    • Bank Bazaar Home Loan
      "App"
      0.5 5.0/5 "Blown Away!"
      It was a really good experience No need to get in old practices of banking process It is a super convenient way to contact the bank with full satisfaction Bankbazaar follow up process ensures us the best service There are all banks on this platform to compare I appreciate this service.
      Was this review helpful? 0
      , noida
      Reviewed on Apr 16, 2018
    • LIC Housing Home Loan
      "Best Service"
      0.5 5.0/5 "Blown Away!"
      My home loan experience was very good with LIC HFL, the loan amount was for Rs 15 lakhs with 8.35% as interest rate. The process was smooth and i received my loan amount on time. Customer service was good, they followed up on time and the tenure of this loan is 10 years.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Apr 16, 2018
    • HDFC Limited Home Loan
      "Good service"
      0.5 4.0/5 "Great!"
      I have taken a home loan from HDFC LTD and my loan experience was good, the process was smooth and i received my loan amount on time. The loan amount was for Rs 20 lakhs with the rate of interest of 8.35% which is best rate in market. Customer service was good and the tenure period of this loan is 10 years.
      Was this review helpful? 0
      , chennai
      Reviewed on Apr 16, 2018
    • Syndicate Bank Home Loan
      "Good"
      0.5 4.0/5 "Great!"
      My home loan is with Syndicate bank and it was done manually. If I want the certificate for tax, I need to visit the bank and get the same I am unable to do it online. The process for the home loan was good and the rate of interest and processing charges are normal.
      Was this review helpful? 0
      , thane
      Reviewed on Apr 16, 2018
    • HDFC Limited Home Loan
      "Best Service"
      0.5 5.0/5 "Blown Away!"
      I have taken a home loan with HDFC LTD and my loan experience was good, the loan amount was for Rs 7.5 lakhs with nominal interest rate when compared to other sources. Customer service was good and they followed up on time. The tenure period of this loan is 11 years.
      Was this review helpful? 0
      , mumbai
      Reviewed on Apr 14, 2018
    • Bank Bazaar Home Loan
      "Good service"
      0.5 4.5/5 "Excellent!"
      Had great experience with bank bazaar. Complete Loan process very quickly and representatives were very professional having good experience in field. Very helpful and co operative . I will recommend it for everyone for hassle free banking process.
      Was this review helpful? 0
      , pune
      Reviewed on Apr 12, 2018
    • Canara Bank Home Loan
      "Average service"
      0.5 2.5/5 "Just OK"
      My experience with Canara bank for home loan was not good, the process was quite lengthy and i received the loan amount very late. The rate of interest for this loan was very high when compared to other banks. Customer service was not up to the mark and their response was delayed.
      Was this review helpful? 0
      , bangalore
      Reviewed on Apr 12, 2018
    • SBI Home Loan
      "Good"
      0.5 4.0/5 "Great!"
      I have my home loan with SBI which was taken 5 years back. The loan amount was 30 lakhs and the interest rate was 8.4% which is average . The tenure period was 20 years . The process was smooth and hassle free . They have sanctioned the loan with the committed time .
      Was this review helpful? 0
      , bangalore
      Reviewed on Apr 12, 2018
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