The term plot loan is defined as the amount of money an individual borrows to purchase land or plot. People often get confused with the term land loan and consider it to be similar to a home loan. Hence in today’s guide to plot loans, we discuss everything you need to know about plot loans.
Let’s say you want to buy land in Mannivakkam and you have applied for a plot loan. Just like any other loan, you have a principal amount, and based on this, you have to pay the EMIs along with the interest to the lender.
However, you must keep in mind that only Indian residents who are above the age of 18 and below the age of 65 years and are either self-employed or salaried can avail of a plot loan.
Let’s take a look at some of the features of a plot loan
Features of a Plot Loan
Before you apply for a plot loan, it is important to have a clear understanding of plot loans.
- A plot loan can be used to purchase land for residential purposes. In fact, you are also free to consider this as an investment which will fetch you a good return when you decide to sell it in the future.
- If you consider opting for a land loan, you must opt for affordable rates only that comes to 7.95% annually. However, it should only be issued from a reliable source.
- There are two reasons for which you can apply for a plot loan. First, for making a direct purchase of land which is sold by a real estate development authority or any housing society. Secondly, you can also apply for a plot loan when you are purchasing land from a landowner.
- Whenever you are applying for a plot loan, remember that the loan to value or LTV ratio can go to a maximum amount of 80 percent. This means a plot loan can only cover 80 percent of the total land value. For example, if you want to buy land in Mannivakkam priced at 50 lakhs, only 46 lakhs can be obtained with the help of a plot loan. However, this loan amount can vary from one lender to another owing to the loan value and other factors.
- The amount you pay in the form of transactional charges is also low in comparison to a home loan. But the percentage you pay also varies from lender to lender.
- Just like users of a home loan enjoy income tax benefits, you will also receive the incentives of a plot loan on the principal amount and the interest. But there are no tax advantages with the parcel loan.
- The repayment period of a plot loan is up to 20 years.
- If a woman applies for a plot loan, then she is eligible to enjoy some additional benefits such as lower rates of interest.
What Documents Do You Need to Apply for a Plot Loan?
We have curated a list of essential documents that you need to produce when you apply for a plot loan.
- Application form
- Photograph
- ID proof
- Proof of residential address
- Recent Payslip or Salary Slip
- Form 16
- 6 months bank statement
- A cheque for loan processing fee
- Land records
- Encumbrance Certificate for plot
- Layout’s map of the plot which is provided by the town planning authority
- Paid property tax receipts
What Kind of Tax Benefits Do I Get on a Plot Loan?
Let’s assume you buy land in Mannivakkam but do not build a house on it. Then you cannot enjoy the tax profits from a parcel loan. When you complete building the house, you will be eligible to apply for the tax deductions. According to the Income Tax department Section 80C, when you apply for a plot loan, you can get a credit limit of Rs. 1.50 lakhs annually on the total principal amount.
What is the difference between a Home Loan and a Plot Loan?
Investors in India have always been keen on buying land either as an investment or for residing. Hence, if you are looking for Mannivakkam land for sale, you will be eligible for a plot loan and not a home loan. There are some more intrinsic details that differentiate a home loan from a plot loan.
Location of a property and its types
You can only get a plot loan for buying a residential plot. But when it comes to a home loan, you can avail of it for any kind of property. The plot of land you intend to buy must also be within the limits of the corporation or municipality.
Lower loan to Value
A home loan can be issued at 90 percent in some cases. But when it comes to a plot loan, no more than 70-80 percent of the LTV can be approved.
NRIs
Although NRIs are a huge segment of investors in the real estate sector of India, they are mostly not eligible for a plot loan. However, they can avail of home loans.
Low tenure of loan repayment
When you are considering to avail a land loan, consider the Mannivakkam land price as the loan repayment tenure is only 15 to 20 years. But home loans can be repaid through a longer tenure of 30 years.
To Conclude,
A plot loan can be of real use if you know all the important details of it. We hope with this guide to plot loans, you can make an informed decision before availing of a land loan.
