Land Purchase Loan

A plot loan or loan against land is a type of financial assistance offered by banks or financial institutions to purchase a piece of land for residential purposes in future. Plot loan generally offers a repayment tenure of 20 years at a reasonable interest rate usually starting at 7.85%  per annum.

There are two types of loans for plot purchases serving different purposes -

• Plot purchase from Statutory Authorities - The land purchased from local development authorities, government bodies, etc. is financed under this category. Banks and financial institutions offer loans up to 75% value of the purchased land for a tenure of up to 15 years.

• Composite Loans - It is a plot construction loan sanctioned by banks or financial institutions if you are willing to construct the residence within three years from the date of purchase. The lending institution allows 60% of the loan amount utilisation for plot purchase and the remaining 40% for construction. Plot construction loans offer a repayment tenure of up to 30 years.

The below table will give the reader an idea regarding the land loan interest rates 2024 that have been set by several Indian lending institutions.

Disclaimer: Current interest rates shown are indicative of market conditions and will vary based on your lock-in period, loan type, credit score, purpose, and loan to value ratio.

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

• The borrower can fund up to 90% of the land plot with the help of a plot loan

• Relatively longer repayment tenure

• Plot loan interest rates are generally very attractive

• Generous Tax Benefit on Plot Loan under Sections 24 and 80C of the Income Tax Act

• Availability of a plot loan balance transfer facility (Offered by a majority of the leading Institutes)

• No Prepayment Penalty

• Low Processing Fee 

• Minimal Documentation Required

Using a plot loan EMI calculator online will indeed help the prospective borrower in knowing the amount that will have to be honoured at the end of every month as EMIs once the plot loan has been availed. All a hopeful borrower will need to do is enter the loan amount, followed by the tenure (In months), and then the plot loan interest rate and the processing fee. Post which, they must click on the submit button to compute the instalment amount.

following plot loan eligibility criteria - 

Over and above the information that was just presented to you, several other factors are taken into consideration. They are the likes of an applicant’s income, liabilities that are to be honoured and the assets that are owned, among others. All of these factors are carefully scrutinised by a lender at the time of processing the loan for the plot purchase application form.

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

• The application form that has been duly filled

• A proof of age

• A proof of income

• A proof of address

• Documents related to the Plot/land 

• Approved layouts/drawings of the plot

Also, Check: Documents required for home loan

You can apply for a land loan online by following the below-mentioned steps:

• Step 1: Visit the website of the financial institution.

• Step 2: Go to the Loan application section. 

• Step 3: Next, you will have to enter basic personal details including your contact information

• Step 4: Verify your identity with the one-time password (OTP) sent to your mobile phone number

• Step 5: You can use the calculator to check the maximum land loan amount and the repayment tenure.

• Step 6: After that, you will have to feed in your employment details, details related to your income, other personal data and land-related information.

After submitting the application form, a representative will get in touch with you to take things forward.

If you need a land loan, it is important for you 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 should 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, such as unfavourable repayment terms or even the rejection of your land loan application.

Under section 80C of the Income Tax Act, one can avail of a tax deduction on their plot and housing loan. The same deals with the principal repayment and does not take the interesting part of the home and plot construction loans into consideration. It must also be noted that a Land Loan borrower can avail of a tax exemption of up to ₹1,50,000 every year.

Check detailed Home Loan Tax Benefit.

• Land loans are available for only residential plots, much unlike home loans, which can be availed for all kinds of properties.

• The maximum LTV (Loan To Value) ratio when it comes to home loans is set at 70 per cent. In the case of a loan for a plot purchase, the LTV ratio can go up to 90 per cent.

• Non-Resident Indians (NRIs) cannot be offered plot loans by most of the banks that are operating on Indian grounds.

• In comparison to home loans, the repayment tenure for land loans is relatively lower.

• Land loans are available only against residential plots, located within municipal or corporation limits.

• The rate of interest on land loans is much higher, as compared to home loans online.

• No income tax benefits are available against land loans, unlike home loans.

• Each lender has a different yardstick to measure an individual’s loan eligibility.

If you would like to learn more about loans for plot purchases or construction of properties, of, if you want to apply for you, you can do so through Bajaj Markets