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We all know about home loans, which we take to either buy an already constructed or under-construction house/apartment, or to construct a house on a plot of land we already own. However, not many of us know about loans for purchasing land. Land loans – or plot loans – are available both to individuals looking to construct a house on a plot at a later date, and to investors and real estate developers. However, if you are buying a plot to construct a house on it, you cannot keep the land undeveloped for a long time, as banks have certain restrictions on by when construction should begin on the plot.
Land loans can be taken to finance the purchase of a vacant plot. However, these loans might be given only for residential land and not commercial or agricultural land. The loan-to-value ratio would be lower in this kind of loan, and other terms and conditions are also likely to be stricter. Let us look at 4 prominent land loans available in the Indian market to get a clearer picture.
ICICI Bank offers land loans for self-construction of a house. A house needs to be built on the purchased plot, within 2 years of the first disbursement of the loan amount. The plot must be situated within municipal limits and if it is outside municipal limits it should be a direct allotment by the town’s development authority. The bank has several tiers of interest rates based on category (salaried, self-employed, woman, weaker social section), type of loan (floating, fixed), and amount of loan. The rates range from 8.65% to 10.1%.
DHFL’s Land Loan/Plot Loan can be taken for constructing your own house on a non-agricultural land located in municipal limits or local development authority limits. The maximum tenure available is 20 years, and interest rates depend on the market conditions, value of the plot and Retail Prime Lending Rate. You can get both fixed interest rates and floating interest rates.
HDFC offers plot loans for both residential and commercial purposes. The key features of these loans are:
Both salaried and self-employed persons can get a residential plot loan. The loan-to-value ratio (LTV – the amount of loan you can get for the cost of the plot) is 90% for loans up to Rs.20 lakh, 80% for loans up to Rs.75 lakh, and 75% for loan requirements of more than Rs.75 lakh. The maximum tenure available is 15 years. You can get either a fixed interest rate on the loan or an adjustable rate. The TruFixed Loan is available in variants of fixed rates for either 2 years or 3 years, with interest rates of 9.2% to 10%, while adjustable rate loans can be had for rates between 9.1% and 9.65%.
This loan can be taken to buy a plot of commercial land if you wish to build an office or commercial space. The tenure limits, LTV terms and types of loans offered are the same as those of the residential plot loan. The adjustable rate loan comes with interest rates of 11.9% to 13.15%, and the interest rate for TruFixed Loans is 11.8% to 13.05%.
Plot loans from Punjab National Bank (PNB) can also be taken for residential and commercial purposes. The terms of these loans are:
To buy residential plots, you can borrow 90% of the market price of the plot if the loan amount is Rs.20 lakh or less; 80% of the plot price if the loan amount is between Rs.20 lakh and Rs.75 lakh, and 75% of the plot value if the loan amount is more than Rs.75 lakh. The loan tenure is flexible, ranging from 3 years to 30 years. The company offers both fixed rate and floating rate loans. Floating rates for salaried persons and self-employed professionals is 10.3%, while that for self-employed non-professionals is 10.5%. Fixed-rate loans are available in 3-year, 5-year and 10-year fixed rate schemes. Salaried persons and self-employed professionals need to pay between 10.25% to 10.5% for fixed-rate loan products, while self-employed non-professionals have to pay between 10.45% to 10.75%.
PNB’s Construction Finance helps real estate developers with money, for buying the land they want to construct on, or finance their project once construction begins. The loan terms are customised according to the needs of the developer. Loan amount can be increased if project costs rise, and repayment methods are flexible and entrepreneur-friendly.
Most banks and housing loan providers offer plot loans for both residential and commercial purchases, and you need to talk to your bank manager to know the exact terms and conditions of the loan. Residential plot loans are more common than commercial loans, though. If you want to buy land for commercial purposes, you can also consider taking business loans.