{"id":64750,"date":"2022-12-28T12:01:26","date_gmt":"2022-12-28T06:31:26","guid":{"rendered":"https:\/\/navimumbaihouses.com\/blog\/?p=64750"},"modified":"2022-12-28T12:11:11","modified_gmt":"2022-12-28T06:41:11","slug":"plot-loan-or-a-composite-loan-2","status":"publish","type":"post","link":"https:\/\/navimumbaihouses.com\/blog\/news\/plot-loan-or-a-composite-loan-2\/","title":{"rendered":"Should You Choose A Plot Loan Or A Composite Loan?"},"content":{"rendered":"

A house takes a long time to construct. From hiring an architect to hiring construction workers, you will have a lot on your plate. Many individuals spend years saving, buying a land, and then taking out a mortgage to build their ideal house. While others borrow money to purchase a plot, pay it back, and ultimately eventually buy the land on which to build their new home. On the other hand, some wise people choose a composite loan, which enables them to quickly fulfil their ambition of owning a property. We have provided detailed descriptions of both types to assist you in making the best loan choice.<\/p>\n

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Land or Plot Loan<\/h2>\n

When purchasing a piece of land for residential use, financial organisations (sometimes referred to as “lenders”) including banks and Housing Finance Companies (HFC) may offer a loan called a “plot loan.” The difference between a home loan and a plot loan is how the loan proceeds are used. Only the purchase of a plot of land may be funded by a plot loan. A standard home loan, on the other hand, can be used to buy a pre-made residential home, such as a bungalow, flat, row house, villa, or other type of building.<\/p>\n

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Important Things to Keep in Mind before Applying for a Composite Loan<\/h2>\n
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  • A composite home loan requires you to construct a home on the property you bought within a certain amount of time. If you are not planning to start building anytime soon, getting a land loan is a better option.<\/li>\n
  • Most financial institutions expect you to start building the house within 1-2 years as part of their composite lending strategy. The lender has the right to increase your composite loan interest rates or demand that you complete the repayment and close the loan if you don’t do this.<\/li>\n
  • If you take out a composite loan, you won’t get the entire loan amount in one installment. Typically, the lender pays it out in three phases.<\/li>\n<\/ul>\n

    The Stage 1:<\/strong> Purchasing the land<\/p>\n

    Stage 2:<\/strong> The beginning of the building process<\/p>\n

    Stage 3<\/strong> will be made available in phases when work gets underway.<\/p>\n

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    • You must give the financing organisation or bank a cost breakdown along with your construction ideas. This will make it easier to determine your composite loan’s interest rate and disbursement amount.<\/li>\n<\/ul>\n

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      How Do Composite Loans Differ From Loans for Land or Plots?<\/h2>\n

      To further comprehend the distinction between a composite loan and a plot\/land loan, refer to the following table:<\/p>\n\n\n\n\n\n\n\n\n\n
      Particulars<\/strong><\/td>\nComposite Loan<\/strong><\/td>\nLand\/ Plot Loan<\/strong><\/td>\n<\/tr>\n
      Interest Rate<\/td>\nVaries according on the bank, ranging from 7.25% to 10.05%.<\/td>\nLoans for land or plots have interest rates that range from 7.7% to 13%, depending on the bank and the loan’s principal.<\/td>\n<\/tr>\n
      Foreclosure Charges<\/td>\nThe RBI states that all prepayment and foreclosure fees do not apply to composite loans. To understand the provisions governing prepayment & foreclosure charges for your composite loan, you must carefully study your loan paperwork.<\/td>\nAlthough banks and financial institutions have different foreclosure fees for land\/plot loans, they typically range from 2% to 5% plus any necessary taxes.<\/td>\n<\/tr>\n
      Duration of Loan Repayment<\/td>\nFor composite loans, the payback period ranges from 10 years to a maximum of 30 years.<\/td>\nMost banks provide maximum repayment schedules between 10 and 20 years.<\/td>\n<\/tr>\n
      Purpose<\/td>\nA composite loan is a bank credit that covers both the cost of the plot and the projected cost of building a house.<\/td>\nOnly residential land can be purchased with a land\/plot loan.<\/td>\n<\/tr>\n
      tax advantage<\/td>\nBorrowers of composite loans may claim a tax credit on principal and interest repayments of up to Rs. 1.5 lakhs and up to Rs. 2 lakhs, respectively.<\/td>\nFor plot loans taken out to purchase land as a long-term investment, there are no tax advantages.<\/td>\n<\/tr>\n
      Loan-to-value ratio (LTV)<\/td>\nFor a composite loan, the LTV ratio may reach 80%.<\/td>\nFor loans for land or plots, the loan to value ratio is around 70%.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

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      Comparing the requirements for a composite loan with a land or plot loan<\/h2>\n

      To avoid having your loan application rejected, double-check the qualifying requirements if you intend to apply for a composite or plot loan. Below are the standard eligibility requirements for land\/plot loans and composite loans:<\/p>\n

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      • Limit of age: 18 to 70 years<\/li>\n
      • Employment Type: Salaried or Self Employed<\/li>\n
      • For composite loans & land\/plot loans, both resident Indians and NRIs may apply.<\/li>\n<\/ul>\n

        Individual lenders may additionally take into account an applicant’s income, possessions, obligations, business continuity (for business owners), and job history when considering eligibility for a plot loan (for salaried individuals).<\/p>\n

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        Basic Documentation Requirements Compared to Land\/Plot Loan vs. Composite Loan<\/h2>\n

        The following list of documents is necessary for both a land loan and a composite loan:<\/p>\n\n\n\n\n
        Composite Loan<\/strong><\/td>\nLand\/ Plot Loan<\/strong><\/td>\n<\/tr>\n
        \u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Duly filled and signed loan application<\/p>\n

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        \u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Photos in passport size<\/p>\n

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        \u00b7\u00a0 \u00a0 \u00a0 \u00a0 \u00a0Identity Proof<\/p>\n

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        \u00b7\u00a0 \u00a0 \u00a0 \u00a0 \u00a0Residency Proof<\/p>\n

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        \u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Income proof<\/p>\n

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        		\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Completed application form<\/p>\n

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        \u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Address proof<\/p>\n

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        \u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Proof of income<\/p>\n

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        \u00b7\u00a0 \u00a0 \u00a0 \u00a0 \u00a0The Proof of age<\/p>\n

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        \u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Evidence of employment\/business<\/p>\n

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        \u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Documents about plots\/land<\/p>\n

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        \u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Plot layouts and drawings (approved by the respective authority)<\/p>\n

         <\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

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        Please keep in mind that the document list is only intended to be illustrative. Additional papers may be requested by your lender as necessary.<\/p>\n

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        Conclusion: Composite Loan or Plot Loan?<\/h2>\n

        The problems of building a home are unique, ranging from choosing the ideal architect to taking into account several options for a composite home loan. But when your house turns out precisely how you envisioned it, it’s all worth it. A land\/plot loan, on the other hand, enables you to buy a plot of land and either build your home at your own pace or leave it as a long-term investment. Before requesting either sort of loan, you must balance the advantages and disadvantages of each one in light of your needs<\/p>\n

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