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 installment 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:

• Visit the website of the financial institution.

• Go to the Loan application section. 

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

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

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

• 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.

Here are some things you should know about to enjoy tax benefits on plot loans:

• You can get tax exemptions on plot loans only if you construct a residential property on the plot 

• You can benefit from tax exemptions once the property’s construction is completed

• As per Section 80C of the Income Tax Act, 1961, you are eligible for a tax benefit of up to ₹1.50 Lakhs on loan repayment

• As per Section 24 (b) of the Act, you can get tax benefits of up to ₹2 Lakhs on the interest paid

Check detailed Home Loan Tax Benefit.

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

• 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