For many individuals, buying a new house or a piece of land might not seem all that different. We refer to them as purchasing real estate. However, there is a difference between plot loan and home loan that needs to be understood while applying for a loan. While home loans are to finance the acquisition of a constructed or under construction or residential residence, plot loans are for financing the cost of the plot.
Difference Between Home Loan and Plot Loan
In India, plot loans and home loans are two different financing options offered by banks and financial institutions. Both serve distinct purposes. Let’s check out the differences below.
Home Loan | Plot Loan |
Provided for buying a ready-to-move-in house, under-construction property, or resale property. It covers the cost of the structure, but not the land alone. | Aimed at purchasing a residential plot for building a house in the future. The borrower must declare their intention to construct the property, and the construction may need to be completed within a specific time as required by the lender. |
LTV can go up to 90% for loan amounts of up to ₹30 lakh, making it easier to finance the property. | LTV is lower, typically 70%-80% of the plot's value, meaning borrowers need to make a higher down payment. |
Lower interest rates are offered, since the property serves as collateral. | Slightly higher interest rates compared to home loans, as plot loans are riskier. |
Longer tenure, up to 30 years, ensuring lower EMI. | Shorter repayment tenure, typically up to 15 years. |
Tax benefits under Section 80C (principal repayment) and Section 24(b) (interest paid) are available for both purchase and construction. | Tax benefits are available only on the construction loan portion, not on the purchase of the plot. |
This is the difference between home loan and land loan.
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Whether you are an experienced homebuyer or a first-timer, a home loan is one of the most significant things you should know about before making a purchase. While some people prefer to purchase an already constructed apartment or house, others prefer to purchase a residential plot of land, either to build a home or for investment purposes. This is when you’ll need to decide whether you have to apply for a plot loan or a home loan. Do you know the difference between
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plot loan vs home loan? Read below to find out:
Difference Between Plot Loan and Home LoanOne basic difference between both a home loan and a plot loan is that one can use a home loan to purchase an under-construction or already constructed residential property. One can use a plot loan to purchase a plot of land that has been earmarked for the construction of a residential property.
Home Loan Vs Plot Loan: Key Differences| Loan type | Land Loan | Home Loan |
| Purpose | To buy a plot of land only for residential purposes. |
To buy constructed or under construction property. |
| Who is eligible | Only Resident Indians |
Resident Indians as well as NRIs |
| Maximum Loan | Around 75 percent of the value of the land |
Around 90 percent of the value of the property |
| Tenure | Up to fifteen years |
Up to thirty years |
| Interest rate | 0.5% to 1% above housing loan |
Lowest among retail loans |
| Tax benefit Applicable | Only to cover construction cost. |
For both principal and interest payments. |
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I hope now you know about the difference between
plot loan vs home loan.
What is the difference between plot loan and home loan?
Lakhan
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2022-05-04T18:25:06+00:00 2022-05-04T18:44:26+00:00Comment
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