Everything You Should Know About Plot Loans
Most Indians have aspirations of becoming home owners. Since buying a house is usually expensive, one must have financial assistance in the form of a home loan from a bank or housing finance company (HFC). This usually refers to a custom home or villa built by a builder, or a prefabricated, multi-story apartment for people living in large cities and urban areas.
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Based on land loan interest rates, a borrower must choose which bank to approach, just like with any other loan, such a home loan. As the name suggests, plot loans are a type of housing loan offered by financial institutions, also referred to as “lenders,” for the purpose of buying a plot of land on which to build a house. Plots of this type can be bought directly from private developers or from government agencies such as the Delhi Development Authority (DDA), Bangalore Development Authority (BDA), City and Industrial Development Corporation (CIDCO), Jaipur Development Authority (JDA), Maharashtra Housing & Area Development Authority (MHADA), etc.
In addition, a home loan is provided for the construction of a house on a parcel of land in accordance with personal preferences. Furthermore, some lenders offer composite plot loans that can be used to cover the costs of both buying a plot and building a home.
How do Plot Loans Work?
Plot loans can be used to finance the mortgage on a residential plot of land. This is the piece of land where your ideal house could one day be constructed. Direct access to plots is possible through projects, real estate housing associations, and development authorities. The majority of banks, in particular PNB Housing, will lend money equal to 70–75 percent of the market value of the plot. In addition, a home loan is provided for the construction of a house on a parcel of land in accordance with personal preferences. Furthermore, some lenders offer composite plot loans that can be used to cover the costs of both buying a plot and building a home.
How Do Plot Loans Work?
Plot loans can be used to finance the mortgage on a residential plot of land. This is the piece of land where your ideal house could one day be constructed. Direct access to plots is possible through projects, real estate housing associations, and development authorities. The majority of banks, in particular PNB Housing, will lend money equal to 70–75 percent of the market value of the plot.
Eligibility for a Plot and House Loan
To be eligible for both a private loan and a home loan, one must meet certain requirements. The application & property requirements for a plot loan are as follows:
Application Eligibility: Lenders take into account an applicant’s eligibility when granting a plot loan, much like they do with a home loan. To put it simply, the applicant’s eligibility is essentially an assessment of their capacity to repay the loan, which is determined by factors such as their credit score, steady income, and other pertinent information.
Property Eligibility: Similar to home loans, lenders only grant loans for land after closely evaluating the legal status, cost, seller, location, kind of property, and other aspects of the property.
Loan-to-Value for a home loan & a plot loan are different.
The majority of lenders contribute between 70 & 80 percent of the selling agreement’s purchase price for the plot, or, if less, the lender’s assessment of the plot’s market worth. This is also known as the LTV (Loan-To-Value) Rate. On the other hand, most banks’ LTV proportions for standard home loans fall between 75 and 90% of the LTV.
Many lenders employ an unbiased third party to value the land in order to ascertain its market value. This is very rare when using a standard house loan. Furthermore, certain lenders provide lower interest rates or might not issue land loans for parcels located outside of cities.
Compare the interest rates on loans and home loans
Lenders usually offer higher interest rates for plot loans than for home loans.
PNB Housing Finance Plot Loan
Plot loans are available at affordable rates from PNB Housing Finance, the non-banking branch of Punjab National Bank, to purchase plots in urban areas.
Features of the PNB Housing Plot Loan
PNB Housing offers loans for the acquisition of urban residential plots. When you obtain a land acquisition loan, you can benefit from the following:
Branch locations in India:
- Loans are simple and quick with doorstep services.
- There are several ways to make repayments.
- favourable interest rates
- Significant tenor duration
- Interest rates are lowered by the government
- Online post-payment services
- If the loan term is prolonged, the amount owed could increase.
You can transform a plot of land into the house of your dreams with the assistance of PNB Housing’s beneficial and affordable residential plot loan options.
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Interest rates on PNB Housing Finance plot loans
Interest rates on home loans
- The best rate for men is 7.20%. Maximum percentage: 8.90%
- The best rate for females is 7.20%. Maximum percentage: 8.90%
- The longest period is thirty years.
- Processing fees take the form of 0.25% of the loan amount.
- Moderate level of affordability
Plot Loan Plan by State Bank of India
SBI Plot loans are offered by the biggest public lender in India, State Bank of India (SBI). Through its SBI Realty Housing Loan programme. SBI offers plot loans with maximum amounts up to Rs 15 crore and 10-year repayment terms. Note that the bank will only approve loans for the purchase of a plot of land on which a house must be constructed within five years of the loan being approved.
Plot Loan Interest Rates at SBI
Interest rates on home loans:
- The ideal rate for females is 7.45%. 7.80% is the maximum rate.
- The best rate for men is 7.50%, while the highest rate is 7.85%.
- Ten years is the maximum duration.
- Processing fees range from Rs 2,000 to Rs 10,000.
- Moderate level of affordability.
LIC Housing Finance Plot Loan Plans
Plot loans up to Rs 15 crores are offered by LIC Home Loan for the purchase of residential property pieces from statutory authorities, including municipal agencies like DDA, MHADA, etc.
Loan interest rates from LIC Housing Finance
Interest rates on home loans:
- The best rate is 7.10% for individuals with a CIBIL score of 750 or above. Maximum percentage: 7.10%
- The best rate is 7.30% for individuals whose CIBIL score is less than 750. The highest percentage is 7.70%.
- Maximum duration of 15 years
- The range of processing fees is Rs 10,000 to Rs 15,000.
- Level of affordability: elevated
Plot Loans from the Bank of Maharashtra
The Bank of Maharashtra offers plot loans to Mumbai-based borrowers so they can purchase land and construct their own homes.
Rates of interest for land loans from Bank of Maharashtra
Interest rates on home loans:
- The best rate for candidates with a CIBIL score of 800 or more is 6.40%, while the highest rate is 7.15%.
- The best rate for individuals with a CIBIL score between 750 and 799 is 6.50%, while the highest rate is 7.60%.
- The longest period is thirty years.
- No handling fees
- Level of affordability: elevated
HDFC Plot Loan Plan
The Housing Development Finance Corporation (HDFC) offers the most reasonably priced land loans available in India at the moment. The main purpose of the HDFC Plot Loan is to purchase direct-allotment and resale plots. You can only take out HDFC plot loans totaling up to Rs 10 crore.
Interest rates on loans for HDFC plots
- The best rate is 6.70% for individuals with a CIBIL score of 750 or above. Maximum percentage at 6.70 percent
- The ideal rate for applicants having a CIBIL score below 750 is 6.85%. The top rate is 7.75%.
- The longest period is thirty years.
- Processing fees range from Rs. 3,000 to Rs. 5,000.
- Level of affordability: elevated
Plot Loan from Bank of Karnataka (KBL-Ghar Niveshan)
People who qualify can obtain the money required to purchase the home plot of their choice with a Karnataka Bank Plot Loan, sometimes referred to as KBL-Ghar Niveshan. The loan has an easy processing procedure and a quick sanctioning time. There are options for flexible repayment terms and competitive interest rates. Both native Indians & non-resident Indians (NRIs) are eligible for this loan.
The following is the interest rate for plot loans from Karnataka Bank:
- The Karnataka Bank plot loan has an annual interest rate that varies from 10.89% to 12.09%.
- An approval for a loan cannot exceed 80% of the residential site’s registration value.
- A maximum payback duration of five years or sixty months is specified.
- The lending margin for the KBL Ghar Niveshan is twenty percent.
A list of the paperwork required for plot loans
The following are some crucial paperwork needed to finish the plot loan process:
- A loan application that is correctly filled out, three passport-size pictures
- Copy of your passport, driver’s licence, voter ID card, or PAN card as proof of identity
- Photocopies of recent power and phone bills, property tax receipts, passports, or voter ID cards are examples of evidence proving residency.
- For individuals who have not been paid, proof of a business address is needed.
- The account statement or passbook for the preceding six months.
- Verification using the signatures of the current bankers.
- Statement of Personal Assets and Liabilities.
Comparing the Tax Benefits of a Plot/Land Loan vs a Mortgage
Unlike home loans, plot loans are not eligible for tax incentives.
Nonetheless, the following Income Tax Act law parts allow for the tax benefits of plot loans on home loans taken out for the purpose of constructing a dwelling on that land:
Interest: The interest paid on a home loan may be deducted up to Rs. 3.5 lacs, as mentioned below:
- Under Section 24B, there is a maximum deduction of Rs. 2 lacs every fiscal year.
- Section 80EE: Up to Rs. 50,000 in deductions are allowed in a single fiscal year if the loan is approved between April 1, 2016, and March 31, 2017.
- Section 80 EEA: The maximum deduction for home loans approved between April 1, 2019, & March 31, 2022 is Rs. 1.5 lacs each fiscal year.
The loan interest expense may be written off by the applicant in accordance with Section 24B, Section 80EE, or Section 80 EEA. A deduction under both 80EE & 80EEA is not permitted.
Principal: The amount of principal repaid is deductible under Section 80C of the Income Tax Act. The current maximum on the 80C deduction is fixed at Rs. 1.5 lacs.
Some Things to Consider When Applying for a Plot Loan
The following are some things to keep in mind while submitting an application for a plot loan:
- Plot/Land Loans are not available for commercial or agricultural purposes; they are exclusively available for residential properties used for the construction of a dwelling.
- The house that will be erected on the plot must be constructed within three to five years of the Plot Loan’s first disbursement. This period of time differs depending on the bank.
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Conditions of Plot Loan Eligibility
The eligibility for a plot loan depends on a number of variables, such as:
- The candidate ought to be a salaried employee or a business owner.
- Credit Score: A borrower’s credit score needs to be at least 750 in order to qualify for competitive interest rates. Interest rates rise in tandem with a drop-in credit rating.
- Age: Applicants should not be older than 70 years old at the time of loan maturity.
- Loan Tenor: The length of the term determines how much of a loan is eligible for.
- Property Cost: The loan amount will be determined by the cost of the property in compliance with PNB Housing’s LTV guidelines.
You may determine your approximate loan eligibility with the use of our plot loan EMI eligibility calculator.
Process Plan for a Purchase Loan
It is now possible for professionals who work with PNB Housing on a salary as well as independent contractors to get a plot loan.
The following is the process to view the loan:
- Go to PNB Housing Finance’s website.
- Go to the “Home Loan” area.
- Select the “plot purchase loan application” link located at the bottom of the page.
Plot Loan EMI Calculator
Using the plot loan EMI calculator, you can find out how much would be due each month after you take out the loan. After inputting the loan amount, term in months, interest rate, & processing fee, all that is left to do is click “Calculate.”
In addition, a home loan is offered for the construction of a house on a plot of land in accordance with personal preferences. Furthermore, a few lenders provide compound plot loans that can be used to cover the price of both purchasing a plot and building a house on it. Some of the top real estate and finance specialists are available to help you get the best answer to your real estate-related questions. Please leave a remark below in this article if you would like to speak with one of our specialists; an executive will get in contact with you shortly.
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