How a land loan is different from home loans

How is home loan different from land loan or plot loan?

A land loan is a kind of loan being taken to acquire a plot for constructing a house. At the same time, the home loan includes the ready possession flat or a bungalow provided to the buyer. The land loan does not include the cost of construction. The home loan can be taken for the ready possession property or else even for an under-construction property. While the plot loan is provided just for an empty land wherein the construction of a building or a house can be done. The interest rates are the same for both the kind of the loans. The plots tend to be more expensive than the apartment as the apartment is a kind of shared land with other people, while the plot is independent ownership of a single person. The borrower can take loans from any of the banks for the home loans or else plot loans. There are no restrictions on taking loans from any particular bank or an NBFC. The borrower can take loans at competitive interest rates from the lender by comparing the loan’s interest rates on the official website of the banks or else the finance portals. 

The loan installments can be calculated on the EMI calculator, available on the bank’s official website. The EMI calculator helps understand the borrower eligibility of the loans and the monthly EMI being chargeable for the loans. Also, the interest repayment amount of the loans can be checked on the EMI calculator. The loan applicant does not have to depend on the bank official to get the queries related to the EMI; instead, the loan applicant can clear their doubts by checking the EMI calculator. The real estate developer can also make land purchases on loans to build the projects. To keep the money rolling, real estate developers sometimes do not block their own money to purchase the plot. As the prices of the plots in the cities have become very costly, the transactions of the plots amongst the individuals except the real estate developers have become very rare. Many of the bungalows also go for redevelopment and are sold to the real estate developers for the construction of the housing projects. Thus, taking loans for the plots has become more popular for building housing projects rather than the construction of bungalows. 

  • Following are the features of a plot loan:

  • The loans are approved for the plots, which are only present within the municipal jurisdiction of the city limits. 
  • The plot loan is not applicable for the purchase of agricultural land. 
  • The land should be located in a village or an industrial area.
  • The tenure of the loans is a maximum of 15 years for the plot. 
  • Tax exemption is applicable only for the construction of the property and can be claimed after the construction of the property only. 
  • The loan to value ratio is usually 80% for the purchase of the plot. At the same time, the rest needs to be paid as a down payment.
  • Loans can be availed for the plots purchased, either resale ones or those purchased in the government auction.  

Features of the home loan:

  • Home loans can be availed for the fully constructed home or else for the under-construction property. 
  • The maximum tenure of the home loans is higher than plot loans, i.e., 30 years.
  • A tax deduction can be availed on the complete property value. 
  • The loan to value ratio is a maximum of 90%.
  • In the case of joint loans, if both persons are earning, then both persons can claim tax benefits. 
  • Loans can be taken for government housing projects or else even from private real estate developers.

Though the interest rates are the same for the plot loans and housing loans still there is some minor difference in the terms and conditions of the plot loans and housing loans. There is a difference between the tenure of the loans and also the loan-to-value ratio. The plot loans customer base has mostly shifted from individual buyers to real estate developers, and while the houses are purchased by the individual buyers only. 

 

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