A plot loan is, as its name suggests, a loan provided by lenders to borrowers who are looking for a plot on which to build a home to gain easier access to capital. Most of the top Indian banks offer these loans at a specific housing loan interest rates that the borrower selects based on accessibility.
You have come to the right place if you are a borrower and want to learn more about the “plot loan” in depth. You may learn everything you need to know about loan for plot purchase or property loan from us through this page. Therefore, keep reading!
What Are Loans for Land or Plots?
To buy a piece of land in India, a buyer approaches lenders for these plot loan interest rate. Most banking institutions proceed by providing financial aid to clients to assist in purchasing lots of lands on which the buyer hopes to construct their dream home.
It should be noted that these plot loans are only offered to people who want to build their own homes, not businesses or farms.
Importance of Plot Loans
Why Plot Loans?
-To buy plots and construct a house on it.
Plot Loans are not available for?
-Plots in rural areas.
What are the interest rates on plot loans?
-If compared to regular home loans interest rates on plats are higher.
Is there any tax benefit?
-Yes, it is available under sections 80C and 24 if the house is constructed.
What are various types of Plot Loans Available?
There are two types of loan for plot purchase available:
- Loans for residential plots.
- Loans for both the purchase of a plot and the construction of a home.
To avoid the dangers associated with plain vanilla plot loans, most banks in India typically seek to make loans to borrowers to purchase and build a plot. Additionally, they will be forthcoming if the loan is being used to purchase a plot of land that is being sold by a development organisation like the Bangalore Development Authority (BDA), City and Industrial Development Corporation (CIDCO), or the Delhi Development Authority (DDA).
Why Would Someone Choose a Plot Loan Interest Rate?
Based on the following reason you will come to know the reasons why a person must choose a plot loan interest rate:
- Plot loans enable purchasers to purchase a profitable piece of land by providing simple access to financing at a competitive interest rate.
- The lenders allow the purchasers to take advantage of Sections 80C and 24 of the Income Tax (IT) Act.
- If they can pay off the loan before the term is up, there are no prepayment penalties.
What are the eligibility criteria and documents required for loan for plot purchase?
1) The Borrower’s Eligibility:
- The buyer must be a resident of India.
- They must work or engage in self-employment for making income.
- When requesting a loan for a plot, applicants must be at least 18 years old. However, before applying, one should confirm the bank’s age requirements.
- Citizens over the age of 65 are not eligible for any plot loans.
2) Required Documents:
- A properly completed application for a plot loan.
- Self-attested copies of the necessary paperwork
- Identification documents such as a driver’s licence, PAN card, and Aadhaar card
- Utility bills as evidence of address
- Passport-sized pictures
- Each additional document is required.
- For salaried borrowers, income documentation PAN card, copies of the last three months’ bank statements, and the most recent three months’ worth of pay stubs.
- Documents for self-employed borrowers: PAN card, professional licence, and most recent years’ worth of bank statements.
- Property documents include a copy of the allotment letter or buyer agreement, title deeds showing the property’s prior ownership chain, a sale deed, a contract of sale, a registration and stamp duty receipt, a notice of compliance,
How much is the maximum amount banks offer on Plot Loans?
Because the plot falls under their loan-to-value ratio standards, lenders of a home loan typically offer the buyers 70%–90% of the purchase price. As a result, the buyer sets aside between 10% and 30% of the plot’s value as well as the cost of the construction loan from their cash. Despite this, the lenders do have a maximum amount they will lend for a portion of land.
Land loans are available from many top Indian banks, although just a few well-known Indian institutions offer loan for plot purchase with favourable interest rates. SBI, PNB, HDFC, ICICI Bank, and other financial institutions are available for purchasing a plot and building a unit simultaneously.
What are the interest rates on plot loans?
The plot loan interest rates charged by banks are typically greater than those of mortgages. Whereas the current PNB housing loan rate is 6.80%, the lender’s minimum interest rate for plot loans is 8.50%. The ICICI Bank, on the other hand, assesses comparable interest rates on housing and land loans.
For better understanding:
|SBI : 7.70%-7.90% Interest Rate
PNB: 8.50%-10.70% Interest Rate
HDFC: 7.05%-7.95% Interest Rate
ICICI Bank: 7.20%-8.35% Interest Rate
What are the processing fees and other charges applied on plot loans?
The bank lenders impose a specific processing fee as part of the loan disbursal process, similar to house loans. The processing fee for land loans ranges from 0.5% to 1% of the loan amount, depending on the bank. Some banks plan to charge a flat price of up to Rs 10,000, while others only charge a specified percentage of the loan amount.
The borrower is required to pay both the processing cost and the legal and technical evaluation fee since they send legal and technical experts to physically visit the plot and review the paperwork in addition to the processing price. The borrower will also be required to pay a conversion charge for the same if the bank lowers rates at any point in the future and they intend to profit from the lower interest rates.
What are the Payment methods in EMI a borrower can avail in the Plot loan?
There are two ways for borrowers to contribute to their EMI payments on a plot loan interest rate:
1) Standing instruction: If you apply for a loan for plot purchase and decide to pay it back in EMIs, you have the option of giving your bank standing instructions that would cause the EMI to be automatically deducted from your account each month on a particular day.
Note: You can easily use your usual bank account and are not required to have an account with the bank from which you wish to borrow money for a plot.
2) Post-dated cheque: Sending a post-dated cheque to the lender, in this case, the bank, is another approach to making timely EMI payments. Please take note that this option is only provided to debtors for whom the ECS facility is unavailable, so if that describes you, feel free to utilise the post-dated cheque EMI method.
- Time frame: To qualify for a loan for a plot purchase, banks typically need the borrower to build a house on the property within a given time frame.
- Many banks only provide plot loan interest rate for the acquisition of land in urban and developing areas; rural areas are not included.
- Prepayment fees for fixed-rate loans: Borrowers who take out a loan for plot purchase at a floating rate of interest are not subject to prepayment fees; however, if the loan is taken out at a fixed rate, the bank will levy a fee. For instance, the prepayment penalty for plot loans from HDFC Bank is 2%.
- Impact of credit scores: Banks place a high value on credit scores. If a borrower has strong credit, they are given a low-interest rate, while those with bad credit are given a higher interest rate. Therefore, if you have a credit score of 700 or higher, be sure to take advantage of it.
- Legal encumbrances: If there are any legal encumbrances on your property-related paperwork, they will not accept your application.