Plot Loan vs Home Loan

Home Loan vs Plot Loan

Learn Which is Better Home Loan or Plot Loan

✓ Home Loan from ₹5 Lakhs To ₹5 Cr ✓ Multiple Lending Partners ✓ Attractive Interest Rates

In common usage, buying a new home or a plot of land could be termed the same - buying property. As the term doesn’t matter when it is not used for general purposes, it is popular among the common people. However, there are important differences when we compare land loans vs. home loans. This should be considered while seeking financial services.

A home loan can be availed to purchase a ready-to-move-in house, a residential property, or an under-construction property whereas a land loan can be availed only to buy a plot of land where you plan to build a home. A home loan cannot be used to purchase a plot, and you cannot get a land loan to buy a ready-to-move-in house or property under construction.

Home Loan vs Plot Loan

Let us understand what is a home loan and a plot loan or land loan in detail here.

Category

Home Loan

Land Loan

Meaning

Loan to buy a home

Loan to buy a plot or piece of land

Purpose

Purchase of a property or which is in the process of being built

Purchase of a plot of land only for residential purposes

Interest Rate

Currently available for roughly 7.50 percent per annum.

Currently available for between 8% and 10% per annum.

Loan Tenure

Up to 30 years

Up to 15 years

Eligibility Criteria 

Lenders in India offer home loans to salaried individuals and self-employed applicants based on their:

  • Age

  • Sources of income

  • Repayment capacity

  • Credit score

Lenders in India offer plot loans to salaried individuals and self-employed applicants based on their:

  • Age

  • Sources of income

  • Repayment capacity

  • Credit score

Difference Between a Home Loan And a Plot Loan

Here are some of the differences you can find when you compare plot loans vs. home loans.

Category

Home Loan

Plot Loan

Location of Property

You can get a home loan to buy property at any location of your choice. If the property is located in a city, the LTV will be high since it has a higher sales value. 

The plot should be located within the limits of the municipality or corporation and shouldn’t be in the industrial or village area.

Purpose

For ready-to-move-in properties, properties under construction or to be self-constructed.

Only for the purchase of a plot of land which will be used solely for residential purposes.

Loan-To-Value (LTV)

The borrower can usually get a loan of around 75 - 90% of the value or cost of the property depending upon the loan amount.

The borrower can usually get a loan of around 75 - 80% of the value or cost of the property depending upon the loan amount.

Tax Benefits

The applicants can get tax benefits on both the interest and principal payments of the home loan.

There are no tax benefits available to plot loan applicants. The only possible benefit is for the amount borrowed to build on it.

Features of a Plot Loan

Before you apply for a plot loan, you have to go through the features of a plot loan.

  • The plot bought with the loan should be located within the limits of the municipality or corporation.

  • A plot loan cannot be used to purchase land which is used for agricultural purposes.

  • A plot loan cannot be used to purchase land located in an industrial area, or in a village area.

  • The maximum tenure of up to 15 years can be availed for a plot loan.

  • The loan-to-value ratio can be as high as 80%. It means up to 80% of the land cost will be provided as a loan.

  • You can avail of a plot loan to purchase a plot through direct allotment or to buy a resale plot depending on the lender.

  • Tax benefits are only eligible for the loans taken for the construction of the property on the plot. This deduction can be claimed only after the completion of the construction of the property.

Features of a Home Loan

Here are the features of the home loan for you to understand better.

  • A home loan can be availed to purchase any property at any location of your choice.

  • The maximum tenure of up to 30 years can be availed for a home loan.

  • You can avail of a home loan to buy an apartment, bungalow, or a villa from approved builders, depending on the lender.

  • Home Loan Tax benefits are available under Sections 24 and 80C of the Income Tax Act respectively for interest and principal amounts paid towards the home loan.

  • If the loan availed is a joint home loan and is availed by a husband and wife who have separate sources of income, they can claim an income tax deduction on the loan separately. It is applicable for both the principal and interest components of the loan amount.

  • Depending on the lender, the loan-to-value ratio can be as high as 90%. It means up to 90% of the property’s cost will be provided as a loan.

  • You can also avail of a loan to buy properties from government developmental authorities, apartment owners’ associations, existing cooperative housing societies, or homes built by private homeowners.

Home Loan vs Plot Loan FAQs

  • ✔️Are the land loans and home loans the same?

    No, though they have similarities in features, land loans, and home loans are different. A home loan can be availed to buy a ready-to-move-in house, a residential property, or an under-construction property whereas a land loan can be availed only to buy a plot of land where you plan to build a home. A home loan cannot be used to purchase a plot and you cannot get a land loan to buy a ready-to-move-in house or property under construction.

  • ✔️Does a home loan include land?

    No, a home loan cannot be used to purchase a plot or a piece of land.

  • ✔️Can a plot loan be converted to a home loan?

    No, conversion of a plot loan into a home loan is not possible. The borrower can apply for loans like composite loans which can be used to purchase a plot and build a house in it within a given timeline.