A majority of Indians dream of owning a home. The cost of purchasing a home is typically high, necessitating financial support from a home loan obtained from bank and housing finance companies (HFC). For those residing in large cities and urban areas, this typically refers to a prefabricated, multi-story apartment or custom home or villa created by a builder.
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Like any other loan, such as a home loan, a borrower must decide which bank to approach based on land loan interest rates. Plot Loans, as the name implies, are a sort of housing loan provided by financial organisations (sometimes known as “lenders”) to purchase a plot of land to construct a home. These plots can be purchased directly from government agencies like the Delhi Development Authority (DDA), City and Industrial Development Corporation (CIDCO), Jaipur Development Authority (JDA), Maharashtra Housing and Area Development Authority (MHADA), Bangalore Development Authority (BDA), etc., from an individual or a private developer.
A home loan is additionally offered for building a house on a plot of land according to one’s preferences. Additionally, some lenders provide composite plot loans that can be used to pay for both the purchase of a plot and the building of a house.
How do Plot Loans Work?
You can finance the mortgage on a residential plot of land with a plot loan. This is the property where your future dream home would be able to be built. Plots can be directly obtained from development authorities, real estate housing organisations, or projects. Most banking organisations, particularly PNB Housing, will lend money for between 70 and 75 per cent of the plot’s market value. The plot loan interest rates for acquisition loans are marginally higher than those on ordinary home loans, about 1% more, and the loan terms vary from 10 to 15 years. However, the tax advantages do not apply to EMI payments on land loans for plot purchases.
It is comparable to a typical home loan, except it can only be used to purchase residential land or a building lot, not a prefabricated house. This loan is only granted after thoroughly evaluating the property and the applicant’s suitability.
Qualification for a Home Loan and Plot Loan
There are specific eligibility criteria that one needs to obtain a home loan and a private loan. Following is the application and property eligibility for obtaining a plot loan:
Application Eligibility: Like how a home loan is approved, lenders consider the application’s eligibility when providing a plot loan. In plain English, the applicant’s eligibility is essentially a measurement of their ability to repay the loan, evaluated based on earning, stable income, credit score, and other relevant indicators.
Property Eligibility: Like home loans, lenders only approve loans for plots of land after carefully examining the property’s legal status, price, location, seller, type of property, and other factors.
Loan-To-Value of a Home Loan and a Plot Loan are Separate.
Most lenders contribute between 70 and 80 per cent of the plot’s purchase price as stated in the selling agreement or its market value as determined by the lender, whichever is less. The LTV (Loan-To-Value) Rate is another name for this. However, the LTV proportion for a typical house loan at most banks ranges from 75 to 90% of the LTV.
To determine the market worth of the plot, many lenders hire a third party to do an impartial valuation of the property. With a typical home loan, this is exceptionally uncommon. Additionally, some lenders provide cheaper interest rates or may not offer land loans for parcels outside of cities.
Plot Loan Interest Rates vs Home Loan Interest Rates
When compared to home loans, lenders typically charge plot loans at a higher interest rate.
Plot Loan from PNB Housing Finance
PNB Housing Finance, the non-banking division of Punjab National Bank, provides plot loans at reasonable rates to acquire plots in metropolitan areas.
PNB Housing Plot Loan Features
Loans are available from PNB Housing for the purchase of urban residential plots. The following perks are available to you when taking out a land acquisition loan:
Location branches in India:
- With doorstep services, loans are quick and straightforward.
- Options for repayment are numerous.
- Favourable interest rates
- Substantial tenor period
- Government-imposed interest reduction
- Post-payment services online
- The loan amount could rise if the tenure is extended
With the help of PNB Housing’s advantageous and cost-effective residential plot loan choices, you may turn a piece of land into the home of your dreams.
Interest rates for plot loans from PNB Housing Finance
Home loan interest rates
– For males, the Best rate: is 7.20 % Maximum rate: is 8.90%
– For females, the Best rate: is 7.20 % Maximum rate: is 8.90%
– 30 years is the longest term.
– 0.25% of the loan amount is charged as processing fees.
– Medium affordability scale
Plot Loan Plan from State Bank of India
SBI Plot loans are available through the SBI Realty Housing Loan product from the State Bank of India (SBI), the largest public lender in India. You can obtain a plot loan from SBI for a maximum of Rs 15 crore with a 10-year repayment period. Be aware that the bank only approves loans to acquire a plot on which a home must be built within five years after the loan’s approval.
Plot Loan Interest Rates at SBI
Home loan interest rates:
– For females, the optimum rate is 7.45% Maximum rate is 7.80%
– For males, the highest rate is 7.85%, best rate is 7.50%
– 10 years is the longest term.
– Fees for processing: Rs 2,000 to Rs 10,000
– Medium affordability scale.
Plot Loan Plans from LIC Housing Finance
For the acquisition of residential property parcels from statutory agencies, including local agencies like DDA, MHADA, etc. LIC Home Loan provides plot loans amounting to Rs 15 crores.
LIC Housing Finance interest rates for loans
Home loan interest rates:
– For candidates having a CIBIL score of 750 or higher, the best rate is 7.10%. Maximum rate: 7.10%
– For candidates with a CIBIL score under 750, the Best rate is 7.30% Maximum rate is 7.70%
– Maximum term: 15 years
– Processing costs range from Rs 10,000 to Rs 15,000
– Scale of affordability: High
Plot Loans Plan from Bank of Maharashtra.
Mumbai-based Plot loans are available from the Bank of Maharashtra so that you can buy land and build your own home.
Interest rates for Bank of Maharashtra land loans
Home loan interest rates:
– For candidates having a CIBIL score of 800 or higher, the best rate is 6.40% highest rate 7.15%
– For those having a CIBIL score of 750 to 799 best rate is 6.50% highest rate is 7.60%
– 30 years is the longest term.
– No processing charges
– Scale of affordability: High
Plot Loan Plan of HDFC
In India right now, the Housing Development Finance Corporation (HDFC) provides the most affordable plot loans. The HDFC Plot Loan is primarily designed to acquire resale and direct-allotment plots. As HDFC plot loans, you are permitted to draw a maximum of Rs 10 crore.
Interest rates for HDFC plot loans
– For candidates having a CIBIL score of 750 or higher, the best rate is 6.70%. Maximum rate: 6.70%
– For candidates with a CIBIL score under 750 optimum rate is 6.85% Maximum rate: is 7.75%
– 30 years is the longest term.
– Fees for processing: Rs. 3,000 to Rs. 5,000
– Scale of affordability: High
Bank of Karnataka Plot Loan (KBL-Ghar Niveshan)
According to their eligibility, people can acquire the funds needed to buy the home plot of their choice through a Karnataka Bank Plot Loan, commonly known as KBL-Ghar Niveshan. The loan has a rapid sanctioning time and a simple processing process. Competitive interest rates and flexible payback terms are available. This loan is open to both native Indians and non-resident Indians (NRIs).
The interest rate for Karnataka Bank Plot Loans are as follows:
– The interest rate for the Karnataka Bank plot loan ranges from 10.89% to 12.09% per annum.
– The maximum loan amount that may be approved is 80% of the registration value of the residential site.
– Five years or sixty months is the maximum repayment period.
– For the KBL Ghar Niveshan, the loan margin is 20%.
A List of The Paperwork Needed for Plot Loans
Some important required documents for completing the Plot loan process are as follows:
– Properly completed loan application, three passport-size photos
– evidence of Identity- photocopies of voter ID card or passport or driving licence or PAN card
– Evidence of Residency – photocopies of recent telephone bills, electricity bills, property tax receipts, passport, or voter ID card.
– Proof of a business address is required for those not paid.
– Passbook or account statement for the previous six months.
– Identification with the current bankers’ signatures.
– Personal Statement of Assets and Liabilities.
Tax Advantages of a Plot/Land Loan Compared to a Mortgage
A plot loan does not qualify for tax benefits, unlike a home loan.
However, under several law sections of the Income Tax Act, tax benefits of plot loans on home loans received for building a house on that land may be obtained:
Interest: As stated below, a maximum of Rs. 3.5 lacs may be claimed as a deduction for interest paid on a home loan:
1. Maximum deduction of Rs. 2 lacs per financial year under Section 24B.
2. Section 80EE: If the loan is approved between April 1, 2016, and March 31, 2017, a deduction of up to Rs. 50,000 is permitted in a single fiscal year.
3. Section 80 EEA: For home loans approved between April 1, 2019, and March 31, 2022, the maximum deduction is Rs. 1.5 lacs each fiscal year.
The applicant may deduct the loan interest expense under Section 24B, Section 80EE, or Section 80 EEA. It is not possible to claim a deduction under both 80EE and 80EEA.
Principal: Section 80C of the Income Tax Act permits a deduction for the principal amount repaid. The 80C deduction cap is now set at Rs. 1.5 lacs.
Some Things to Think about while Applying for a Plot Loan
Here are some of the points that one needs to remember while applying for a plot loan:
1. Plot/Land Loans are only accessible for residential properties intended for building a home and not for any business or agricultural uses.
2. Within three to five years after the Plot Loan’s initial disbursement, construction on the house to be built on the plot must begin. The length of this time varies from bank to bank.
Conditions for Plot Loan Eligibility
Plot loan eligibility is based on several factors, including:
- The applicant should be employed on a salary or be a business owner.
- Credit Score: To be eligible for competitive interest rates, a borrower’s credit score must be at least 750. As the credit rating declines, the interest rates rise.
- Age: At the time of the loan maturity, applicants shouldn’t be older than 70 years old.
- Loan Tenor: The amount of a loan’s eligibility is based on the term’s duration.
- Property Cost: In accordance with PNB Housing’s LTV regulations, the loan amount will be based on the property’s price.
With the aid of our plot loan EMI eligibility calculator, you may estimate your tentative loan eligibility.
Process Plot for Purchase Loan
For professionals employed by PNB Housing on a salary as well as self-employed, obtaining a plot loan is now feasible.
The procedure for viewing the loan is as follows:
– Visit the website for PNB Housing Finance
– Select the “Home Loan” section.
– Click the “application” for the “plot purchase loan” link at the bottom of the page.
Plot Loan EMI Calculator
You may determine the amount that must be charged as EMI once you take out the plot loan by using the plot loan EMI calculator. You only need to click “Calculate” after entering the loan amount, term in months, interest rate, and processing fee.
Additionally, a home loan is provided for building a residence on a land plot following one’s preferences. In addition, some lenders offer compound plot loans that can be applied to the cost of both buying a plot and constructing a home on it. NoBroker has some of the best real estate and finance experts that can guide you to the best solution for your real estate-related queries. If you’re interested in consulting our experts, please comment below this article; our executive will be in touch with you soon.
Frequently Asked Questions
Q. Is taking out a plot loan to buy a plot a sensible idea?
With the exception of situations when you wish to build your home, purchasing a plot by taking out a loan is not a wise financial move.
Q. How do plot loans operate?
A plot loan is a loan given by a bank or other lender to customers whose primary purpose for the loan is to buy a plot of land so they can construct their ideal home.
Q. What distinguishes a home loan from a plot loan?
While land loans are available for buying a parcel of land to build a house on or for investment purposes, home loans are available for properties that are currently being produced, under construction, or are ready to be purchased.
Q. What size loan does the bank offer for a plot?
Most banks offer plot loans up to 75% of the property’s value. However, if the sum is less than Rs. 75 Lakhs, you may be eligible for up to 90% of the property’s worth.
Q. Are plot loans covered by 80C?
The title transfer charges for the plot and the registration fees are included in the exempted limit if they are paid in the year the property is built.
