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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

    • IIFL Home Loan
      "Good Service"
      0.5 4.0/5 "Great!"
      From IIFL, i have taken the home loan and the process was not lengthy and the follow up was good. IIFL people approach was prompt and they offered me a low interest rate of 8.35% and the loan amount also they have increased what I'm looking for. Earlier they offered me only Rs. 15 lakhs after that they have sanctioned more than 16 lakhs.
      Was this review helpful? 0
      , mumbai
      Reviewed on Oct 17, 2019
    • HDFC Limited
      HDFC Limited Home Loan
      "Hassle Free Loan"
      0.5 5.0/5 "Blown Away!"
      HDFC is a hassle free and quick loan services. Everything was done through online so no paper work required. I had applied the loan amount of Rs. 30 lakhs. They have sanctioned the loan in 5 days. Its floating interest rates and there was no hidden charges. I have chosen the tenure period of 15 years. If the RBI is reducing the interest rate but they decreased the same after 1 year but increment is happening immediately.
      Was this review helpful? 0
      , thane
      Reviewed on Oct 17, 2019
    • LIC Housing Home Loan
      "Good Loan service"
      0.5 4.0/5 "Great!"
      I got the good interest rate of 8.5% from the LIC housing with minimal documents. Overall process also very fast and good so i have chosen this bank. I had applied the loan amount of Rs. 17 lakhs and i have chosen the tenure period of 10 years. Totally, i'm satisfied with the loan service provided by LIC.
      Was this review helpful? 0
      , mumbai
      Reviewed on Oct 17, 2019
    • SBI Home Loan
      "It's okay"
      0.5 4.0/5 "Great!"
      I had a home loan with State Bank of India and it was closed without any issues. They took longer time for the verification and lot of paper works. The interest rate is flexible and fine. There are charges for processing fee and plus insurance fee.
      Was this review helpful? 0
      , thiruvananthapuram
      Reviewed on Oct 17, 2019
    • Corporation Bank Home Loan
      "Best Service"
      0.5 4.0/5 "Great!"
      I have taken Home loan directly through Corporation Bank .I have applied for the loan amount of 12 lakhs for the tenure of 18years .More documents collected for this home loan and got the loan amount on time and it was really sufficient .There was no drawbacks faced so far .I am satisfied with the service .
      Was this review helpful? 0
      , mumbai
      Reviewed on Oct 16, 2019
    • HDFC Limited Home Loan
      "Good Service"
      0.5 4.0/5 "Great!"
      I had applied for home loan with HDFC limited on few months before, they have sanctioned a loan for 22 lakhs but due to some problem of my builder from my end I kept on hold for the loan process. They have detected for the processing fee of 11 thousands but they refunded 9 thousands rupees. The tenure of 15 years. Interest rate was nominal of 8.55%.
      Was this review helpful? 0
      , kanchipuram
      Reviewed on Oct 15, 2019
    • HDFC Limited Home Loan
      "Good"
      0.5 4.0/5 "Great!"
      With HDFC limited I have taken home loan on 8 months before which was processed through them directly. They have approved for 8 lakhs but as of now I have taken only for 5 lakhs remaining 3 lakhs I will get later from their end. Due to shop will come in commercial loan so I have split the loan amount to get it. For the tenure of 15 years. The processing fee for 5000 rupees. The rate of interest 8.8%, they have sanctioned the loan within one month.
      Was this review helpful? 0
      , coimbatore
      Reviewed on Oct 15, 2019
    • Punjab National Bank Home Loan
      "Average service"
      0.5 3.0/5 "Satisfactory"
      I have availed Home loan directly through Punjab National Bank .The rate of interest and the processing fee was very high ,I have got the loan amount on delay basis and i have applied for 26 lakhs for the tenure of 15 years.I have not faced any difficulties until i have received the loan .
      Was this review helpful? 0
      , new delhi
      Reviewed on Oct 14, 2019
    • SBI Home Loan
      "Excellent Loan Service"
      0.5 5.0/5 "Blown Away!"
      SBI Home Loan is excellent because I've a salary account with them. They offered me a interest rate of 9.5% approximately. I took the loan amount of Rs. 23 lakhs so far i have got only Rs. 16 lakhs since my building is under construction. My EMI is not yet started. They sanctioned the loan in 2 working days.
      Was this review helpful? 1
      , dindigul
      Reviewed on Oct 14, 2019
    • SBI Home Loan
      "Easy and best loan"
      0.5 5.0/5 "Blown Away!"
      SBI is a best bank and they had a better option. There is only simple documentation required and executive came to my place for collecting all the documents. I got the loan within 7 days. SBI did not taken any processing charges and they gave better and cheap interest. They take minimal time and better response from the customer care so i had chosen SBI for my home loan.
      Was this review helpful? 1
      , agra
      Reviewed on Oct 11, 2019
    • Central Bank of India Home Loan
      "Highly recommendable bank"
      0.5 5.0/5 "Blown Away!"
      My home loan was purchased from Central bank of India. The branch offer was approved the loan immediately and they had a good behavior with the customer. I got the better clarity about the loan process as well as the rate of interest in central bank of India is less than compared to others so i have chosen this bank and the Branch Manager helped me in a better way.
      Was this review helpful? 3
      , bhubaneshwar
      Reviewed on Oct 05, 2019
    • DHFL Home Loan
      "Need to decrease interest charges"
      0.5 5.0/5 "Blown Away!"
      From DHFL I have taken a home loan almost more than a year. One of my cousin's friend working there he recommend to apply for a home loan. The process was smooth and sanctioned a loan within 6 days with sufficient amount of 20 years. The rate of interest was high.
      Was this review helpful? 4
      , vijayawada
      Reviewed on Oct 05, 2019
    • ICICI Bank Home Loan
      "Average Loan service"
      0.5 3.0/5 "Satisfactory"
      ICICI bank has provided me a home loan at the time of i want on a immediate basis. Since the necessity is over they have provided me a timeliness loan. I taken the loan amount of Rs. 10 lakhs and the have charged me a higher interest rates which i'm not comfortable with.
      Was this review helpful? 1
      , mumbai
      Reviewed on Oct 05, 2019
    • HDFC Limited Home Loan
      "Excellent"
      0.5 5.0/5 "Blown Away!"
      I have balance transfer for a home loan with existing finance to HDFC LIMITED. One month before only I have a transfer of a loan. They have outstanding amount of 10 lakhs for the tenure period of 10 years. The rate of interest is 8.6% only for mortgage charges for 8 thousands need to pay for it.
      Was this review helpful? 1
      , goa
      Reviewed on Oct 04, 2019
    • review Home Loan
      "Need to decrease charges & improve customer service "
      0.5 1.0/5 "Really Bad"
      I have taken a home loan with SUNDARAM FINANCE on 10 years before which was processed through them directly. The amount which was given for 13 lakhs for the tenure period of 20 years. There was lot of issues I faced with them customer service is not good response. The rate of interest was high of 14% compare to other.
      Was this review helpful? 1
      , goa
      Reviewed on Oct 04, 2019
    • SBI Home Loan
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      I have taken home loan directly through State Bank Of India .The rate of interest and the processing fee was nominal ,I have got the loan amount on time and got a clear picture about the loan process ,I have availed this loan for the tenure of 20 years .I have completed only 2 years of EMI so far .,
      Was this review helpful? 5
      , vizianagaram
      Reviewed on Oct 04, 2019
    • Central Bank of India Home Loan
      "Average service"
      0.5 3.0/5 "Satisfactory"
      I have taken Home loan directly through Central Bank OF India ,I have got the loan on exact time ,The rate of interest and the processing fee was nominal ,I have got all the details about this loan very clearly through bank agent.The process was very easy and still this loan is active .
      Was this review helpful? 1
      , ramanathapuram
      Reviewed on Oct 04, 2019
    • SBI Home Loan
      "Good"
      0.5 5.0/5 "Blown Away!"
      Nearly 11 years before I had taken a home loan with STATE BANK OF INDIA which was processed directly to them.The loan amount was sufficient for the tenure period of 15 years. The rate of interest and processing fee are nominal. They have sanctioned a loan within few days and the process was good.
      Was this review helpful? 2
      , itanagar
      Reviewed on Oct 04, 2019
    • Central Bank of India Home Loan
      "Easily accessible bank"
      0.5 4.0/5 "Great!"
      I have just applied the home loan from Central bank of India. I had a reference over there hence i applied the home loan from Central Bank of India. Documentation process was hassle free. They have offered me a interest rate of 10.1% and the processing fee was 1% of the interest amount +18% GST charges. They have dispatched the loan 20 days. The staffs are so friendly
      Was this review helpful? 2
      , bangalore
      Reviewed on Oct 01, 2019
    • HDFC Limited Home Loan
      "Customer friendly loan service"
      0.5 4.5/5 "Excellent!"
      HDFC was the only bank which is offering for the home loan in the area where i have purchased the house so i opted with HDFC LIMITED. I had applied the loan amount of Rs. 28 lakhs and the given interest rate is 8.5% and they charged me a processing fee of nominal one. I took the loan 3 years ago and they took 40 to 50 days to sanctioned the loan.
      Was this review helpful? 2
      , ambala
      Reviewed on Oct 01, 2019
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