Do you know you can get loan to buy plots?

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Taking a home loan to buy a house or a flat is easier than taking a loan for land. The type of land matters a lot. Most of the banks do not give loans to buy agricultural land. Some PSUs, i.e. government banks give loans but not to all customers. Small farmers or labourers who do not have any land, can get loan for farm land.

Getting a loan to buy non-agricultural land is a bit easier. But among these too, the loan for residential plot is easier. The requirement of most of the banks to sanction loan to buy non-agricultural land is that the residential plot should be within the municipal corporation or urban area. Loan can also be availed to buy a plot in the outskirts of the city. Banks usually give loans for residential plots.

Home loans are available for up to 30 years.  However, the tenure of the plot or land loan is not that long. Banks can usually give up to 15 years to repay the plot loan. The tenure of plot loan of State Bank of India i.e. SBI is 10 years.

Plot loan’s LTV i.e. loan-to-value ratio is lower than home loan. In case of home loan, it can be up to 90% of the cost of the property. However, in case of plot loan, only 70 to 75 percent of the cost of the land is available as loan. Almost 25 to 30 percent of the money will have to be paid out of pocket on taking the plot loan.

Plot loan is considered a bit risky as compared to home loan. Because of this, the interest rate of plot loan can be up to 1.5 percent higher than home loan. In case of commercial or industrial plots, the interest rate can be higher.

According to bankbazaar.com, SBI’s home loan rate starts from 9.15 per cent while plot loan interest rate is 9.20 to 9.80 per cent. HDFC’s home loan rate starts from 8.45 per cent. Plot loan rates are from 8.65 to 9.35%. Federal Bank home loan interest rates start from 8.80% while plot loan rates start from 12.35%. PNB Housing Finance Limited home loan rates start from 8.75% While the rate of plot loan is between 9.5 to 11.65 percent.

A deduction of up to Rs 1.5 lakh is available on the principal repayment of home loan under section 80C and up to Rs 2 lakh on the interest paid under section 24B. Tax benefit is not available in case of plot or land loan. If you take plot purchase and construction loan to buy land and build a house, then you get tax exemption.