Know Plot Loan For Land Purchase Complete Details

Banks and financial institutions offer a plot loan to individuals looking to purchase a piece of land for personal or commercial use. These loans are typically used to purchase land for house building or investment purposes. The loan amount is disbursed to the borrower in a single lump sum and is usually secured by the land that is being purchased. The borrower is then required to repay the loan, along with interest, in regular installments

Table of Contents

Best Banks for Plot Loan

Are you in the market for a plot loan? With various options available from different banks and financial institutions, it can take time to determine which is best for your needs. This comparison guide helps you evaluate the other schemes and options available:

Bank Name	Interest Rate for Salaried	Interest Rate for Self Employed	Tenure	Loan Amount
State Bank of India	7.45% p.a. – 7.85% p.a.	7.45% p.a. – 7.85% p.a.	10 years	INR 15 crores
ICICI Bank	7.00% p.a. – 7.65% p.a.	7.15% p.a. – 7.80% p.a.	20 years	INR 30 crores
HDFC Bank	6.85% p.a. – 7.75% p.a.	6.85% p.a. – 7.90% p.a.	15 years	Contact the bank
Bank of Baroda	6.75% p.a. – 8.25% p.a.	6.75% p.a. – 8.25% p.a.	30 years	Contact the bank
LIC Housing Finance	6.66% p.a. – 7.80%	6.66% p.a. – 7.90%	30 years	Contact the company
Indiabulls Home loans	8.65% p.a.	NA	25 years	Contact the bank
Union Bank of India	6.80% p.a. – 7.35% p.a.	6.85% p.a. – 7.65% p.a.	30 years	Contact the bank
PNB Housing Finance	8.35% p.a. – 10.25% p.a.	8.55% p.a. – 10.55% p.a.	30 years	Contact the bank

Types of Plot Loan

There are several different plot loans available in India. Some of the most common types include

Residential Plot Loans: This type of loan is intended for individuals looking to purchase a piece of land to build a house.
Commercial Plot Loans: This type of loan is intended for businesses and entrepreneurs looking to purchase land for commercial use.
Agricultural Plot Loans: This loan is intended for farmers and agriculturists looking to purchase land for agricultural use.
Plot and Construction Loans: These loans are provided to individuals who wish to purchase a plot of land and construct a house. The loan is disbursed in stages, with the initial disbursement used for the purchase of the plot and subsequent disbursements used for construction.
Land Development Loans: These loans are provided for land development, such as levelling and surveying. This type of loan is generally for commercial purposes for developers and builders.

Plot Loan for Salaried Individuals and Self-Employed Individuals

For Salaried Individuals

Plot loans are typically available from banks and other financial institutions. The loan amount is determined based on factors such as the applicant’s income, credit score, and the value of the plot being purchased. Salaried individuals will typically be required to provide proof of income, such as salary slips and income tax returns. They may also be required to provide collateral or a co-signer to qualify for the loan.

For Self-employed Individuals

Plot loans may also be available from banks and other financial institutions, but the loan approval process may be more rigorous. Self-employed individuals will typically be required to provide proof of income, such as financial statements, income tax returns, business registration, and other documents.

Self-employed individuals may also be required to provide collateral or a co-signer to qualify for the loan. It is important to note that the interest rate, processing fee and other charges may vary between the loan offered to salaried individuals and self-employed individuals.

The documentation requirements, income criteria, loan tenure and repayment options may also differ. It’s advisable to consult with a financial institution or a loan expert for more specific information on plot loans for self-employed individuals.

Eligibility Criteria for Plot Loan

The eligibility criteria for plot loans can vary depending on the financial institution or lender. However, generally, to be eligible for a plot loan, an individual should have:

A good credit score
A clear title for the plot of land being purchased
The applicant must be an Indian resident
The applicant’s age must be between 18 years to 65 years

In addition to the above, some financial institutions may also require additional information such as a specific minimum income level and minimum years of work experience.

Required Documents for Plot Loan

As for the required documents, the specific documents needed to apply for a plot loan can vary depending on the lender. Still, commonly, the following documents are typically required:

Proof of income: Recent salary slips, Form 16, bank statements for six months
Proof of identity: Aadhaar card, PAN card, passport, voter ID card
Proof of address: Utility bills, rent agreement, passport, voter ID card
Proof of land: Title deed, layout plan of the plot, No Encumbrance’ Certificate, and land records.
Proof of loan repayment capacity: bank statements, income tax returns, and financial statements (for self-employed individuals).

Plot Loan EMI Calculator

A Plot loan EMI calculator is an AI online tool that helps the borrower calculate how much EMI(Equated monthly instalment) they need to pay off each month of the loan over a given period. This EMI is calculated based on the loan amount, the interest rate and tenure. The borrower can also use this calculator to estimate how much interest they will pay throughout the loan and compare different loan options.

EMI Payment Methods

EMI, or Equated Monthly Instalment, is a method of repaying a loan in which the borrower pays a fixed amount each month until the loan is fully repaid. Regarding plot loans, some common EMI payment methods include

Auto-debit: The borrower’s bank account is linked to the loan account, and the EMI amount is automatically debited from the account on the due date.
Post-dated cheques: The borrower provides post-dated cheques to the lender at the time of loan disbursal, and the lender encashes the cheques on the due dates to collect the EMI.
Online payments: Some lenders also offer the option of paying EMIs online through net banking or mobile banking.
ECS (Electronic Clearing Service): This is similar to auto-debit, but rather than the loan account being linked to the borrower’s bank account, a mandate is provided for the EMI to be deducted automatically from the borrower’s bank account.

Note: It is important to note that some specific terms and conditions may vary from lender to lender, and it is wise to check with the lender for methods of payments they accept.

Features and Benefits of Plot Loan

The loan amount can be used to purchase a piece of land for personal or commercial use.
Interest rates on plot loans are generally lower than other loans.
These loans can be used for various purposes, including building a house, agricultural, or commercial use.
Plot loans come with various repayment options, including fixed and floating interest rates.
Borrowers can choose a loan tenure that suits their needs and financial capabilities.
Some financial institutions also offer tax benefits on these loans.

Difference Between Plot Loan and Home Loan

A Plot loan is specifically designed to purchase a piece of land, whereas a home loan is intended to purchase a house. While both types of loans are used to purchase property, they have some key differences:

Interest rates: The interest rates on plot loans are generally lower than home loans.
Loan amount: The loan amount for a plot loan is typically lower than for a home loan.
Tax benefits: In India, tax benefits for plot loans are less than for home loans.
Security: A plot loan is typically secured by the land purchased, while the house secures a home loan.

What’s the Maximum Funding and the Loan Payment Term?

The maximum funding for a plot loan in India can vary depending on the lender but typically ranges from 75% to 90% of the plot’s value or the estimated construction cost. However, this can vary based on factors such as the borrower’s creditworthiness, the property’s value, and the lender’s underwriting guidelines. The loan payment term differs but is generally between 5 and 30 years.

Interest rates on plot loans in India can vary but typically range between 8% and 12%. It’s important to note that the interest rate can also be linked with the individual’s credit score and the property’s location and value. Some of the lenders also provide floating and fixed rate options. It’s always recommended to shop around and compare offers from different lenders before deciding on a plot loan.

How to Get Tax Exempted from Plot Loan?

The interest paid on a loan taken to purchase a home is eligible for income tax exemptions under Section 24 of the Income Tax Act 1961. Hence, once your home is completed, you can get your plot loan converted into a home loan to avail yourself of the exemptions.

The maximum amount that can be claimed as a deduction under this section is INR 2 lakh per financial year.

Additionally, under Section 80C of the Income Tax Act, 1961, the principal amount repaid on loan taken to purchase a plot of land is also eligible for a tax deduction of up to INR 1.5 lakh per financial year. The total deductions under Section 80C, including other investments and expenses, cannot exceed the overall limit of Rs 1.5 lakh. It’s advisable to consult with a tax professional or the IT department for more accurate and up-to-date information.