Plot Loans

A plot loan is a type of financial assistance offered by banks or financial institutions to purchase a piece of land for residential purposes in the future. Plot loan generally offers a repayment tenure of up to 32 years at a reasonable interest rate starting from 7.99% p.a.

When buying land, lenders offer different types of loans based on the land’s condition and your purpose. Here are the types of plot loans:

• Raw Land Loans

For completely undeveloped land with no utilities or roads. These typically come with higher interest rates and a larger down payment.

• Unimproved Land Loans

For land with basic access, such as a road, but lacking full utilities. Interest rates and terms are slightly better than those for raw land loans.

• Improved Land Loans

For plots ready for construction, with utilities and infrastructure in place. These come with the best terms and are similar to home loans in several ways.

They entail lower interest rates, longer tenures, higher LTV ratios, and faster approval since the land is construction-ready and poses less risk to the lender.

Here are some of the features and benefits of a land purchase loan:

• Use the loan for personal or investment land purchases

• Approval is easier when the plot is in a good location

• Longer repayment tenures help maintain lower, affordable EMIs

• Land is a finite resource that offers high resale value

• Low processing fee keeps upfront costs manageable

• Minimal documentation is required for application

To apply for a plot loan, you need to meet the following criteria:

• Indian residency required

• Age between 23 and 67 years for salaried professionals

• Age between 23 and 70 years for self-employed individuals

• Minimum 3 years of work experience for salaried applicants

• Minimum 5 years of business continuity for self-employed individuals

These documents will be required in order to apply for plot loans:

• ID Proof: PAN/Aadhaar card, voter ID, driving licence

• Address Proof: Utility bills, Aadhaar card, passport

• Income Proof Documents for Salaried Applicants: Last 3 months’ salary slips, Form 16, ITR copies of previous 2 years

• Income Proof Documents for Self-employed Applicants: IT returns of the last 2 years, audited balance sheet from a certified CA, P/L statement of the last 3 years, qualification/degree certificates for professionals and business licence details along with TDS certificate

If you need a land loan, you need to have a very good credit score, as it is an indicator of your repayment capability. It is, in fact, the first thing that the lender will see when your land loan application comes their way. 

Ideally, you need to have a credit score of 750 or above to stand a good chance of getting a land loan. Anything lower than that, or worse, having no credit history at all, can lead to unwelcome outcomes for you. This may entail unfavourable repayment terms or even the rejection of your land loan application.

Some common points to differentiate between plot loans and home loans are as follows:

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