If you are one of those looking to buy a plot for the purpose of constructing a home, a plot loan provides you with simple financial access. You can avail the loan from distinct leading financial institutions like HDFC or SBI. These banks offer HDFC plot loan and SBI plot loan, respectively to match your varying needs linked with home construction. Discussed here are the distinct aspects of land or plot loans. Read on to understand.
Plot loan – What is it and what is the purpose of opting for it that you must be aware of?
Any loan that you as a buyer may be seeking from a lender to purchase a land piece, would qualify as a plot loan. Lenders in India provide financial help to you as a buyer to buy land plots and parcels on which you intend to form a residential or commercial unit. Remember that here, plot loans are provided to you as a buyer for a particular reason. In this case, as a borrower plan to form a commercial space or use the piece of plot for agricultural reasons, you would not be able to place an application for plot loans or land loans provided by financial institutions. So, it is crucial for you to understand the distinction between plot loans and home loans.
| Plot Loans | |
| Not available for | Purchasing plots in the rural regions. |
| Intended for | Purchasing plots and building houses on this. |
| Rate of interest | More than the basic home loan rate of interest. |
| Tax benefit | Available as per Section 24 b and 80 C, just if a home is even constructed |
The distinction between home loan and plot loan –
You can place an application for a home loan to purchase an already-constructed home or build a home on a plot. In contrast, a plot or land loan is taken up to purchase a plot or land piece.
Also Check: SBI Plot Loan
Plot loan – types
Plot loans are of 2 kinds – loans to purchase residential land and loan to purchase a plot to construct a home. A lender usually approves your application in case the plot loan is taken up to acquire land being sold by the development bodies like DDA (Delhi Development Authority), CIDCO (City & Industrial Development Corporation), BDA (Bangalore Development Authority), etc.
What are the advantages of availing a plot loan?
Besides the fact that a plot loan endows you with an option to buy a lucrative land piece via simple access to funding at attractive rates, land loans even allow you to avail tax deduction as per Section 80 C and Section 24 (b) of the IT Act. Another crucial feature of opting for a plot loan is that you as a borrower will not require paying any kind of prepayment fees if you are able to close a loan before the completion of the repayment tenure.
Plot loan eligibility
To get a plot loan, you as a buyer must be an Indian resident earning income via a job or through self-employment. You must be over the age of 18 years while placing an application for a loan. Lenders such as SBI plot loan, HDFC plot loan or ICICI offer loans usually if you are aged around 25. Though financial institutions come with differing norms in such a regard, they hardly offer plot loans to you if you are aged over 65 years.
What are the crucial documents for securing a plot loan?
With a duly filled out plot loan application form, you as a borrower must submit a self-attested copy of distinct documents that financial institutions would scan to grant you a plot loan. Additionally, as your age, identity, and address proof, you as a borrower must provide documents linked with income proof and all land-linked papers. While distinct lenders may ask for distinct papers, they would expect you as a buyer to provide most of the crucial documents. These include.
∙ 3 passport-sized photos
∙ Passport
∙ Aadhaar card
∙ Driving license
∙ Voter ID
∙ Water or electricity bill
∙ Bank statement or copy of passbook showing your address
∙ Sale deed
∙ Rent Agreement
Crucial documents that serve as income proof for the salaried include –
∙ Salary slips for the past 3 months
∙ PAN card
∙ Form 16 of last 2 years
∙ Bank statement copy for the last 3 months (must be a salary account)
Crucial documents that serve as income proof for self-employed include –
∙ Certificate of professional qualification
∙ PAN card
∙ Past 3 years’ income tax returns with P/L (profit & loss) account and balance sheet, which must be duly audited and certified by a CA (chartered accountant).
∙ Bank statement for the past 12 months of personal and business.
Crucial property documents that you must submit are –
∙ Copy of buyer agreement and allotment letter.
∙ Title deeds involving the past chain of property documents in the resale cases.
∙ Sale Agreement
∙ Sale deed
∙ Stamp duty receipt and registration
∙ Development Agreement
∙ NOC from builder
Note that, the above list of documents is indicative, and lenders may ask for any additional documents at plot loan application time.
How can you apply for a plot loan?
You as a borrower can approach a bank branch and apply for a plot loan through the online medium via the official bank portal.
Maximum plot loan amount –
Lenders usually provide 70 – 90 per cent of the buying value as a plot or land loan under LTV (loan to value) ratio. Thus, you as a buyer must arrange nearly 10 – 30 per cent of the land & construction expense through your own funds. In fact, PNB or Punjab National Bank asks you as a borrower to arrange just 10 per cent of the buying expense involving stamp duty & registration fees, on your own factoring you meet specific terms and conditions. However, lenders tend to have a certain cap on the maximum amount that they can provide you as a plot loan.
SBI or State Bank of India, for example, provides as high as Rs 15 crore as a plot loan via a Realty home loan deal. On the contrary, ICICI bank provides plot loans for land ranging anywhere between Rs 8 lakh and Rs 3 crore. It means even if you can pay an amount of Rs 1.20 crore to buy a plot equaling Rs 4 crore, ICICI bank will not allow you to avail the plot loan.
