Thinking of Plot Loan? Get a Detailed Information Here!
Updated on February 28, 2024 , 8433 views
Investing in a plot is always a good idea as the value of Land keeps growing in over the long-term. It gives a better return at the time of sale. In India, people purchase lands or plots for various purposes, predominantly as an investment option.
In the time of requirement, the banks also extend you a plot loan, which can be repaid in Equated Monthly Instalments (EMI). Under plot loans, you get many features like - easy repayment tenure, flexible EMI, etc. Read on to know more!
Features of Plot Loan
You can buy land or a plot for residential purposes. Also, can use the plot as an investment option, which may give you better returns in the future.
The plot loans come with affordable interest rates, which is as low as 7.95% per annum.
The processing fee is very low.
The Loan to Value ratio of the plot can be a maximum of 80%. You can get the loan amount of maximum Rs. 80% of the Land Value. For instance, if the plot value is Rs. 20 lakh, then you can get a loan of Rs. 18 lakh. The Loan to Value may change from lender to lender and it mainly relies on the amount and other factors.
You can get tax benefits once you complete the construction of your house on the plot purchased. Note that there will be no tax benefits on an empty plot.
Women borrowers attract lower interest rates on this loan.
The maximum tenure of the plot is a maximum of 20 years where you can easily pay your loan amount.
Plot Loan Eligibility
An applicant must be an Indian resident and aged between 18 to 65 years.
The eligibility criteria for a plot loan is as follows:
15 years to 30 years
7.95 % p.a. onwards
75-80% of your property value or 4 times of your gross annual Income
You can avail tax benefits if you construct a house on the plot. Once the construction is completed, you can claim a tax Deduction. As per the Section 80C of the income tax Act, you can avail a deduction of Rs. 1.5 lakh per annum. Other than this, you can also get tax benefits on the interest portion of the loan under Section 24 after completing the construction of your house and you start residing in the house.
Under Section 24 of the Income Tax Act, you are eligible for an annual deduction of Rs. 2 lakh.
Note: To avail tax benefits you have to convert your plot into a regular Home Loan.
Credit Score and Plot Loan
A Credit Score is an important decision-maker for loan approval. The loan term, amount and interest rate depends on how well is your credit score. The higher the score, the better and faster would be loan deals. The presence of a poor credit score could lead to unfavourable terms or sometimes even rejection of the loan.
DIfference between Home Loan and Plot Loan
You can avail plot loan only for residential purpose, but home loans are available on all properties.
The repayment tenure of the land loan is very low as compared to home loans.
The maximum Loan to Value (LTV) for plot loans is specified as 80%. In some cases, the LTV for home loans can go up to 90%.
Most of the banks do not offer plot loans to NRI.
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