Understand What a Composite Loan is and How it Can Help You
Want to purchase a lot and build your dream house, but are concerned about taking two different loans? A composite loan could be the solution for you. It allows you to accomplish both tasks with one loan, which is very convenient!
Understand What a Composite Loan is and How it Can Help You
People often buy a plot of land before they can start thinking about constructing a home. They also often end up getting two separate loans to be able to afford these assets. However, what if we were to tell you can avail a single loan that can help you get your dream home on the plot of your choice?
If you are planning to purchase a loan, then NoBroker can help you with Home Loan services. NoBroker offers a free-of-cost end-to-end service with a dedicated field relationship manager at your doorstep to assist you. You can check your eligibility for a home loan using the Home Loan Eligibility Calculator.
To understand what is composite loan is and how it can help you, read this blog. Understand what the terms of a composite loan are, how it is different from a regular home loan, and how you can avail of one.
What is a Composite Loan?
A composite loan is a comprehensive loan provided by certain banks and lending institutions for the purpose of buying a plot of land and constructing on said land within a specified timeline.
A composite loan, meaning a plot plus construction loan, is perfect for individuals who want to start construction immediately after purchase of the plot instead of waiting a few years in between. Upon availing a plot construction composite loan, the lender or bank provides the borrower with a fixed timeframe within which construction on the plot needs to begin. A failure to start construction within this period could increase the composite loan interest rate.
Composite Loan General Terms and Rules
While a composite home loan seems like an attractive option, you need to keep in mind the following composite loan scheme rules that you would need to adhere to:
- Most lenders require borrowers to start construction on the plot within 2 years of purchasing it. Any delay in this can lead to an increase in the composite loan interest rate. Repayment of the loan begins 2 months after the completion of construction or after 2 years from the date of disbursement, whichever is sooner.
- Like most home loans, borrowers are required to finance about 20% of the costs on their own. Unlike most home loans, composite loan interest rates are higher.
- The loan amount is disbursed in instalments directly into the borrowers’ accounts. Since the lender has access to all construction plans, ensure the amount is used ONLY for construction purposes.
- Composite loan tax benefits are only available after you’ve submitted a certificate of completion to the lender. To avail of composite loan tax benefits, you would need to submit a certificate of completion and start paying your EMIs.
Comparison of Composite Loans from Various Banks
| BANK | MAX. LOAN AMOUNT | LOAN TENURE | MINIMUM AGE ELIGIBILITY | MAXIMUM AGE ELIGIBILITY |
| Aditya Birla Capital | ₹25 lakhs | Up to 20 Years | 21 years | 60 years- for a salaried
70 years for the self-employed |
| Bank of Baroda | Up to ₹20 crores(varies based on location) | Up to 30 Years | 21 years | 70 years |
| HDFC Bank | – | Up to 15 years | 21 year | 65 years |
| ICICI Bank | ₹3 crores | Up to 20 years | 25 years | 65 years |
| State Bank of India | – | Up to 10 years | 18 years | 65 years |
| Tata Capital | ₹5 crores | Up to 30 years | 24 years | 65 years |
Aditya Birla Capital Composite Loan Key Features
- Simple and efficient loan application process and documentation.
- Serviceable at 37 cities across India
- Low processing fees
Required documents include-
- Identity Proof: Passport/Voter’s ID/Driving License/Aadhar Card/PAN card
- Proof of Income: Form 16 and the latest 3 months’ salary slip showing all deductions for salaried applicants. IT Returns/ financial documents for the last 2 years and CA-certified computation of income for the last 2 years for self-employed applicants.
- Copy of Title documents and approved plan.
- Rental receipts or documents showing receipt of income in case of other income sources.
- Bank statements where salary or income is shown credited for the last 6 months.
Loan to property value-
| Loan Amount | Loan to Property Value |
| Up to ₹ 30,00,000 | 90% |
| ₹ 30,00,001 – ₹ 75,00,000 | 80% |
| Above ₹ 75,00,000 | 75% |
Bank of Baroda Composite Loan Key Features
- Low interest rates and processing fees
- No prepayment penalty
- Moratorium period of up to 36 months post-loan disbursement
- Available for Non-Resident Indians, Persons of Indian origin, and Overseas Citizens of India
- Co-applicant minimum age is 18 years.
Maximum loan amount varies based on location-
| Location | Maximum Loan Amount |
| Mumbai | ₹20 crores |
| New Delhi, Bangalore, and Hyderabad | ₹7.50 crores |
| Chandigarh, Mohal, and Panchkula | ₹5 crores |
| Other metro cities | ₹5 crores |
| Other urban areas | ₹3 crores |
| Semi-urban and rural areas | ₹1 crore |
HDFC Bank Composite Loan Key Features
- HDFC offers credit score-linked interest rates starting as low as 8.45%
- Female applicants with female co-applicants have a greater chance of getting lower interest rates.
Loan to property value-
| Loan Amount | Loan to Property Value |
| Up to ₹ 30,00,000 | 80% |
| ₹ 30,00,001 – ₹ 75,00,000 | 80% |
| Above ₹ 75,00,000 | 75% |
Documents required-
- Proof of Identity- PAN Card/ Form 60 and Passport/ Driving licence/ Voters ID/ Aadhar card.
- Proof of income- Last 3 months’ Salary Slips, Last 6 months’ Bank Statements, showing salary credited, Latest Form-16, and IT return.s
- Property documents- Copy of Allotment Letter / Buyer Agreement, Title Deed, and documents including the previous chain of the property documents in resale cases
- Own Contribution Proof
- Employment Contract / Appointment Letter in case the current employment is less than 1 year old. A passport-size photograph of all the applicants / co-applicants on the Application Form, and signed across.
- Cheque for processing fee
ICICI Bank Composite Loan Key Feature
ICICI Bank Composite loans offer loans at very low processing fees
- Floating interest rates
- Low processing fees
- Up to 20 years loan repayment period.
State Bank of India Composite Loan Key Features
Get the SBI Realty Home Loan with a maximum loan amount of ₹15 crores
- Low interest rates and processing fees
- No prepayment penalty
Documents required include-
- Completed loan application
- 3 Passport size photographs
- Proof of identity: Voter’s ID card/ Passport/ Driving licence/ PAN card
- Proof of residence: Recent Telephone Bills/ Electricity Bill/Property tax receipt/ Passport/ Voters ID card
- Proof of business address for non-salaried individuals
- Statement of Bank Account
- Signature identification from present bankers
- Personal Assets and LiabilitiesStatementt
Tata Capital Composite Loan Key Features
- Quick processing and instant loan approval through an online portal
- Minimum salary of ₹30,000 per month and minimum work experience of 2 years required for salaried applicants.
- NRI applicants need to have a minimum work experience of 3 years.
Documents required-
- Age Proof: Passport/ Driving License/ Life Insurance Policy/ Birth Certificate/ PAN Card/ School Leaving Certificate.
- Identity Proof: Passport, Driving License, PAN Card, Voter ID.
- Address Proof: Utility Bill/ Bank Statements/ Property Registration Documents/ Property Tax Receipt/ Voter ID.
- Office Address Proof: Employee ID Card/ Appointment Letter/ Letter from employer on official letterhead.
- Other proof of income documents based on the type of employment, i.e., self-employed, salaried, or salaried NRI.
Eligibility Criteria for Composite Loan
To qualify for a composite loan, applicants must meet basic criteria related to age, income, employment type, and construction plans, ensuring responsible lending and smooth disbursal.
| Criteria | Details |
| Age Limit | 21 to 70 years |
| Employment Type | Salaried / Self-employed |
| Minimum Income | ₹3–5 lakhs annually |
| Credit Score | 650+ (750+ preferred) |
| Own Contribution | 20%–25% of land + construction cost |
| LTV Ratio | Up to 80% |
| Construction Deadline | Start within 12–24 months |
| Co-applicant | Allowed |
| Documents | ID, income, bank & property proofs |
| Eligibility Check Tool | Composite Loan Eligibility Calculator |
Benefits of a Composite Loan
A composite loan offers a smart financial solution by combining land purchase and home construction into a single loan, providing convenience, flexibility, and tax advantages for eligible borrowers. Here are some of the benefits and why it matters:
| Benefit | Why It Matters |
| One Loan, Two Purposes | Covers both land purchase and construction |
| Lower Overall Interest | Cheaper than taking separate land and home loans |
| Structured Disbursement | Phased payments help manage cash flow |
| Tax Benefits | Eligible for composite loan tax benefits post-construction |
| High LTV (Loan-to-Value) | Finance up to 80% of the total cost |
| NRI Eligibility | Available to NRIs just like resident Indians |
Key Points About Composite Loans You Need To Remember
1. A land loan is not the same as a composite loan-
Lenders only offer land loans for buying individual parcels of land. However, a composite loan means a financing programme covers both the cost of the land and the building. You must provide the lender with information about your construction plans when applying for a composite home loan. Therefore, apply for a land loan if you want to start the construction later.
2. Building a home is mandatory-
A composite home loan requires that construction starts within a fixed time. This is a key feature that differentiates what a composite loan means from a typical land loan. If you’re unsure what is composite loan means, remember it includes the plot plus construction funding under one umbrella.
3. Lenders will finance up to 80% of the cost of your land and building-
Under the composite loan scheme, you can pay for up to 80% of the total cost when you use a composite lending arrangement. Based on the documentation you provide, lenders will assess the expected land and building cost and grant a loan for up to 80% of this amount.
4. Interest rates for composite loans are greater than those on standard home loans-
Of all loan types, home loans have the lowest interest rates. Lenders offer mortgage loans for purchasing a property that is either finished or still being built. However, because a composite loan can be used to both acquire land and build a house, its interest rates are marginally higher.
5. NRIs can also get a composite loan-
The composite loan scheme is available to NRIs just like regular citizens. All applicants must go through the same composite loan eligibility calculator process to assess eligibility, an identical application, and disbursement process.
6. Lenders release the loan in instalments-
If you apply for a composite home loan, you won’t get the full loan amount up front. The loan will be disbursed by the lender in three phases:
- When you buy the land.
- When you start building the home
- In stages, as construction is in progress
The lender will need to see your construction blueprints and a breakdown of expenditures. Your composite loan interest rates and the amount of disbursement will be influenced by this.
7. The total loan amount will be deposited into your personal bank account.
The loan amount will be paid out by financial institutions in a series of instalments into your bank account. Make sure you only utilise your composite home loan to purchase land and build the house, as you have already given the lender access to your construction blueprints.
8. Tax advantages for composite loans are available-
One of the major composite loan benefits is that under the Income Tax Act, you are eligible for composite loan tax benefits if you finish building your home within three years. You can begin receiving composite loan tax benefits for the annual principal and interest payments after the building of your home is complete.
A composite loan is a comprehensive loan solution for individuals looking to buy a plot of land and construct a house on it. It includes both the cost of the land and the construction, with the lender disbursing the loan amount in instalments. To avail of composite loan benefits, one needs to start construction within a specified timeline and submit a certificate of completion to the lender.
Loan applicants often face the challenge of finding the right home or composite loan that suits their financial needs and requirements. The process can be confusing, time-consuming, and filled with hidden costs. With numerous options available in the market, it becomes difficult to choose a loan that meets all your needs.
Choosing the right composite home loan ensures long-term savings and financial clarity in your property journey.
Conclusion
NoBroker Home Loan Services can simplify this process for individuals by offering a comprehensive solution for all their home loan needs. With NoBroker, you can find the right home loan at low interest rates, with minimal documentation and fast disbursal. They will have a dedicated relationship manager who will assist them throughout the process from start to end.
The NoBroker Home Loan Services team will help them compare and choose the best loan that fits their requirements and easily find the right home loan, saving them time and money, and ensuring peace of mind. So, if you are looking for a home loan, choose NoBroker home loan services and experience a hassle-free, convenient, and personalised service.
