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Loan for Land Purchase

Plot Loan Interest Rate and Eligibility

Last Updated 23rd May 2022

  • Land purchase loan, also called Plot loan is taken to purchase a land.
  • Loan for buying land can be availed at site loan interest rate starting at 6.50%.
  • You can add co-applicants to increase eligibility to get a land loan.
Land Loan Interest Rate 6.50%
Processing Fee Upto 0.5% of loan amount or ₹ 10,000
Maximum Loan Amount Upto 90% of property value
Maximum Loan Tenure Upto 30 years
Lowest EMI Per Lakh ₹ 632 for 30 years
Apply for Home Loan @ 6.50%* Get upto ₹ 1,000* Voucher

Plot Loan Interest Rates for 2022

Bank Plot Loan Interest Rate Processing Fee
SBI Plot Loans 6.65% Min ₹ 10,000;
HDFC Plot Loans 7.05% Upto 0.50%
Min ₹ 3,000; Max ₹ 10,000
ICICI Bank Plot Loans 8.90% Upto 1.00%
PNB Housing Finance Plot Loans 8.35% Upto 0.50%
Axis Bank Plot Loans 7.10% Upto 0.20%
Max ₹ 10,000

Land Loan Purchase

‬Many borrowers often get confused between land loans and ‬ home loans. While a loan for land purchase, also known as a Plot loan, helps purchase a plot or land and is available only for the purchase of the land on which construction is to be carried out subsequently. On the other hand, a ‬ home loan helps you purchase an existing house property or construct a new flat or house.

Like other loans, land loans are also repaid in EMIs (‬Equated Monthly Installments) ‬, with the lender charging land loan rates on the principal loan amount secured by you. You are required to pay the plot loan within the stipulated time, failing which the lender has the legal right to confiscate your property to earn back the loan amount.

Types of Land Loans/ Plot Loans

Before we get into the feature‭ & ‬schemes run by various banks,‭ ‬it is important to understand the distinction between a plot only and a plot‭ ‬ plus ‬construction loan.‭

  • Plot Loan : ‬ ‬You can avail a loan for plot purchase for the purchase of a vacant residential plot or a piece of land which can be later used to construct a house or for investment purpose.‭ ‬The property should be located within the municipal or corporate limits.‭ ‬This type of loan is a high-risk loan,‭ ‬and there are no tax benefits.‭
    In addition, the land purchase loan interest rate varies for every bank; however, it primarily depends on factors like employment type, the amount of loan for plot purchase, and the variant of the loan. Certain banks offer lower rates of interest if women take a plot loan.
  • Plot + Construction Loan : This loan is availed to purchase a residential plot and construct a house on the property within the stipulated time and is also called loan for plot purchase and construction. ‬If a borrower does not commence construction within the specified period the bank may increase the plot purchase loan interest rate.‭
  • Parameters Land Loan with Construction Regular Home Loan
    Interest Rates Rates are similar to a home loan, ‬but the plot + Construction Loan interest rates can be higher if you want the construction period to be longer Interest rates are starting @6.50%*.
    LTV Upto‭ ‬70%‭ ‬of property’s value Upto‭ ‬90%‭ ‬of property’s value
    Tenure Upto‭ ‬15‭ ‬years Upto‭ ‬30‭ ‬years
    Tax Benefits The plot loan that is taken for construction and the benefit can be claimed after completion of construction On principal amount under section‭ ‬80C and interest amount under section‭ ‬24‭(‬b)
    Prepayment Penalty Nil for individuals on floating rates Nil for individuals on floating rates
  • Land Loan Interest Rates : The rate of interest to buy land and home loans are similar in some cases..‭ ‬However,‭ ‬some banks offer a few basis points higher for land purchase loan interest rate than that of home loans.‭ ‬Banks give a stipulated time for construction over the plot,‭ ‬and you are required to submit a construction certificate with the bank.‭ ‬If you do not construct over the plot within the period from the date of the first disbursement,‭ ‬land loan interest rates structure for you might change from a home loan to a loan against property.
  • Loan to Value Ratio‭ (‬LTV‭)‬ :‭ Loan to value or LTV means the amount of loan that you can get against the property.‭ ‬LTV,‭ ‬in the case of‭ ‬loan for land purchase with construction,‭ ‬is significantly lower and could be capped at a maximum of‭ ‬70%‭ ‬of the land value.‭ ‬In the case of home loans,‭ ‬LTV ranges between‭ ‬75%‭ ‬to‭ ‬90%.
  • Lower Tenure :‭ Land loans have relatively a shorter tenure of up to‭ ‬15‭ ‬years in most cases,‭ ‬which is not the case in home loans,‭ ‬and is accompanied by a longer tenure of‭ ‬30‭ ‬years.‭ ‬Therefore,‭ ‬the EMI in the case of a loan for plot purchase is higher than that of regular home loans.‭ ‬The tenure for a land loan also depends on the your age ,‭ ‬repayment capacity,‭ ‬etc.
  • Tax Benefits : Home loans qualify for a tax deduction on payment of the principal amount under Section‭ ‬80C of the Income Tax Act as well as the interest component under Section‭ ‬24‭(‬b‭) ‬of the Income Tax Act.‭ ‬On the other hand,‭ ‬tax benefits on a land loans are not available.‭ ‬However,‭ ‬you can claim a tax deduction on loan if the house is constructed on a plot purchased .‭ You can claim a tax deduction against the loan amount taken for construction,‭ ‬after the completion of construction on the plot.
  • Prepayment Penalty : Floating rate loans sanctioned to individual borrowers are free from the prepayment penalty if you want to foreclose the loan.‭ ‬However,‭ ‬a land loan like a home loan could attract prepayment charges of‭ ‬2‭ ‬to‭ ‬4%‭ ‬of the prepaid amount for a non-individual borrower.‭ You should read the loan agreement carefully and clarify the foreclosure charges of the loan before signing the agreement.‭

Plot Loan Eligibility Criteria

You are required to meet the eligibility criteria mentioned by the lender to apply for a plot loan. ‬Use the plot loan eligibility calculator online to know the eligibility.

  • You should be a resident of India
  • You should be aged between‭ ‬18‭ ‬and‭ ‬70‭ ‬years of age
  • You should have a regular flow of income
  • You can be either salaried or self-employed individual
  • You should have a good cibil score of 650 and above

You are required to commence construction over the land or plot within the stipulated time to get a plot‭ ‬plus ‬construction loan.‭ ‬The stipulated time frame can vary from lender to lender.‭ ‬For example,‭ ‬SBI specifies a construction period of‭ ‬5‭ ‬years from the date the loan has been sanctioned.‭ ‬However,‭ ‬ICICI Bank specifies a construction period of‭ ‬2‭ ‬years on plot‭ ‬plus‭ ‬construction loan.

Documents Required for Plot Loan

You require the following documents to avail a loan for land purchase. These are similar to that of a home loan.

  • Duly Filed Loan Application Form
  • Recent Passport Size Photographs
  • Last‭ ‬2‭ ‬years ITR
  • Proof of Identity‭ – ‬PAN Card,‭ ‬Voter’s ID Card,‭ ‬Passport,‭ ‬Driving Licence
  • Proof of Residence‭ – ‬Rent agreement,‭ ‬Leave and License,‭ ‬Latest Utility Bills and Passport
  • Income Documents for salaried‭– ‬6‭ ‬months payslip,‭ ‬2‭ ‬years Form‭ ‬16,‭ ‬latest‭ ‬6‭ ‬months bank statement showing salary credit
  • Business proof for self employed such as VAT/‭ ‬service tax registration,‭ ‬incorporation details in case of companies,‭ ‬business address proof,‭ ‬profit and loss account and balance sheets certified by CA,‭ ‬copy of partnership deed and proof of business existence and business profile
  • Property Documents‭ ‬-‭ ‬Past title chain,‭ ‬Sales deed,‭ ‬Conveyance deed,‭ ‬Allotment letter,‭ ‬Possession letter,‭ ‬Latest property tax receipt,‭ ‬Copy of approved plan for construction/‭ ‬extension

Land Purchase Loan Processing Fee and Charges

The land purchase loan includes various fees and charges as listed in the table below:-

Pre-payments charges and Foreclosure charges Allowed with Nil charges for floating rate loans
Processing fees Up to 0.5% of loan amount or Maximum ₹ 10,000, whichever is higher.
Penalty charges 2% on the overdue amount
Loan statement charges ₹ 50-₹ 250

3 Tips to Get a‭ ‬Loan to Buy Land

‬The lender does not easily finance plot purchase loans ‬because of the high risk. ‭ ‬So,‭ ‬to avoid loan rejection and increase your chances of loan approval,‭ ‬follow a few basic tips:

  • Maintain a good credit score : Ensure that you have a good credit score of 650 and above to avail a plot loan. A good cibil score ensures the plot loan lender of your creditworthiness and ability to pay back the EMI. Availing loans at a bad cibil score may turn up the interest rates.
  • Debt and Income Ratio : Your loan application will be approved if you maintain a good debt and income ratio.‭ ‬Lesser the ratio,‭ ‬the better are the chances of loan approval.
  • ‭Apply for a loan based on your repayment capacity : Before applying a‭ ‬loan for plot purchase,‭ ‬you need to evaluate how much loan amount you can afford based on your income and ability to repay.‭ ‬To check the loan affordability,‭ you can make use of online calculators to know the eligibility.

Benefits of Plot Loan

Taking a site loan is a secured source of financing, and if you take a land loan, you can avail the following benefits:

  • The process of approval of land loans is easy and secure.
  • It is an economically viable option to take a land loan.
  • The repayment tenure of land loans is higher than personal loans.
  • The ownership of property stays with you after taking a plot loan.
  • You can avail tax benefits on a land loan if it is taken for construction.

What are the Tax Benefits on Plot/Land Loan?

You can only avail of tax benefits on a plot lot if you construct a house on the plot and the year you complete the construction.

  • As per Sec 80 C of the Income Tax Act, you can claim tax benefits of upto Rs. 1.5 lakhs on the principal repayment.
  • You can get tax deductions on interest components upto Rs. 2 lakhs once you begin living in the constructed house.

How to Apply for Land Purchase Loan at MyLoanCare?

To apply for land loan with best bank for plot loan at MyLoanCare you can follow the given steps:-

  • Visit the website of MyLoanCare
  • Now navigate to Home loan from the main page
  • Fill the form with required form at the right hand side
  • Enter the OTP (One Time Password) received on entered mobile number
  • Click on ‘Submit’
  • Further, enter the details like Gender, Type of land, Type of construction etc
  • Click on ‘Submit’
  • Offers page will open up, check the best offers available

FAQs

Can I get a home loan for land purchase‭?

No,‭ ‬if you wish to buy a vacant plot or a piece of land,‭ ‬you cannot apply for a home loan.‭ ‬In this case,‭ you need to apply for a loan for land purchase as the home loan is available only for the property already constructed or which is undergoing construction.

Are there any tax benefits on the loan for land purchase?

No,‭ ‬there are no tax benefits available on a loan for land purchase,‭ ‬unlike home loans.‭ ‬However,‭ ‬if you wish to avail of tax benefits on a land purchase loan,‭ ‬you need to construct a house on the purchased plot .

What are the minimum and maximum tenure of loan for land purchase?

‬Banks or NBFCs give loans for a tenure for minimum five years and maximum fifteen years on the land purchase loan. The maximum tenure in some cases may range up to 30 years.

What is the minimum CIBIL score required for plot loan‭?

The minimum credit score required to avail of a‭ ‬loan to buy land or plot is‭ ‬650‭ ‬and above.‭ ‬And,‭ ‬if you have a credit score below‭ ‬650,‭ ‬it might get difficult to get the plot loan approved easily.

Which Bank is Best for Plot Loan?

The best bank for plot loan will be the one which offers lower interest rate, good customer service and maximum tenure. SBI is the best bank for plot loans because it offers lowest interest of 6.65%. In addition to that, based on customer service,Axis Bank is the best option to avail loans at satisfactory service.

Can I apply for a Land Loan to buy agricultural land?

Yes, you can apply for a land loan to buy agricultural land. You can get a loan for upto Rs 10 lakh and for a tenure of 10 year-15 years. However, you should have relevant documents needed to avail the loan.

How much down payment is required for a plot loan?

For site loan or plot loan, you will need to pay 30% or more- depending on the LTV ratio- as a down payment because banks give loans up to 70% of the plot amount.

Do Land Purchase Loan Interest Rates remain higher than Home Loan?

Yes, site loan interest rate/ land purchase loan interest rate is higher than a regular home loan. Usually, the interest rate is a few basis points higher because it involves more risk. Currently, the lowest site loan interest rate is 6.50%.


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