Plot loan, also known as Land loan, is offered by banks and Housing Financial Companies (HFCs) to customers looking to avail loan for plot purchase, with the ultimate aim of constructing a residential unit on the purchased plot. While many lenders provide land loans as a separate product within the broader home loan category, others allow the borrowers to avail regular home loan and use its proceeds to purchase plot and construction of residential unit thereon.
Lenders generally lay down specific conditions to ensure that customers who have availed a Plot Loan must complete the property’s construction within a fixed duration from the date of loan sanction/disbursal.
Features of Plot Loan
Plot Loan Interest Rate
Lenders usually provide Plot Loans at floating interest rates. Many lenders also determine the interest rate for loan applicants based on factors like credit score, loan amount, monthly income, occupation profile, employer’s profile, etc. of the loan applicants. The plot loan interest rates are usually similar or a bit higher than the interest rates of regular home loans.
|Name of Lender||Up to Rs. 30 Lakh||Above Rs. 30 Lakh to Rs. 75 Lakh||Above Rs. 75 Lakh|
|SBI||8.40% - 10.15% p.a.||8.40% - 10.05% p.a.||8.40% - 10.05% p.a.|
|HDFC Bank Limited||8.35% p.a. onwards||8.35% p.a. onwards||8.35% p.a. onwards|
|LIC Housing Finance||8.40% – 10.35% p.a.||8.40% – 10.55% p.a.||8.40% – 10.75% p.a.|
|ICICI Bank||8.75% p.a. onwards||8.75% p.a. onwards||8.75% p.a. onwards
|Kotak Mahindra Bank||8.70% p.a. onwards||8.70% p.a. onwards||8.70% p.a. onwards|
|PNB Housing Finance||8.50% - 14.50% p.a.||8.50% - 14.50% p.a.||8.50%-11.45% p.a.|
|Punjab National Bank||8.45%-10.25% p.a.||8.40%-10.15% p.a.||8.40%-10.15% p.a.|
|Bank of Baroda||8.40% - 10.65% p.a.||8.40% - 10.65% p.a.||8.40% - 10.90% p.a.
|Union Bank of India||8.40% – 10.80% p.a.||8.40% – 10.95% p.a.||8.40% – 10.95% p.a.|
|IDFC First Bank||8.75% p.a. onwards||8.75% p.a. onwards||8.75% p.a. onwards|
|L&T Finance Limited||8.60% p.a. onwards||8.60% p.a. onwards||8.60% p.a. onwards|
|Bajaj Housing Finance||8.50% p.a. onwards||8.50% p.a. onwards||8.50% p.a. onwards|
|Tata Capital Housing Finance||8.70% p.a. onwards||8.70% p.a. onwards||8.70% p.a. onwards|
|Federal Bank||8.80% p.a. onwards||8.80% p.a. onwards||8.80% p.a. onwards|
Note: Interest rates as of 27th October 2023
LTV ratio of a plot is the proportion of the property’s value that can be financed through the loan. Lenders usually offer LTV ratio of up to 80% for Plot Loans. However, the final LTV ratio set for an applicant would depend on the credit risk assessment undertaken by the lender. Factors considered while undertaking credit risk assessment include the credit profile and repayment capacity of the borrower, market value of the property, location of the plot (within or outside city limits), etc.
Most lenders offer Plot Loans for tenures ranging between 10 to 20 years. Lenders would usually consider the repayment capacity of an applicant while setting their loan tenure. Note that home loan lenders usually require their applicants to maintain their monthly EMI contribution, including that of their proposed loan, within 50-60% of their net monthly income. Plot loan applicants can use the home loan EMI calculator to determine the optimum tenures and EMIs for their plot loans based on their repayment capacity.
Tax Benefits on Plot Loan
Borrowers are not eligible for availing income tax deductions on the repayment of principal and interest components of the plot loan. However, such borrowers would be eligible to claim tax deductions on the repayment of home loan availed for constructing the residential property on the plot purchased through plot loan.
Availability of Balance Transfer Facility
Existing plot loan borrowers can exercise the home loan balance transfer facility to transfer their outstanding plot loan to other lenders at lower interest rates and thereby, reduce their interest cost. However, the approval of the balance transfer application would primarily depend on the credit risk assessment of the applicant by the new lender.
Processing Fees and Prepayment Charges
The processing fees charged by home loan lenders for availing a plot loan ranges from 0.25% to 1.50% of the total loan amount. RBI has barred lenders from charging prepayment fees on floating rate loans. However, lenders are free to charge or waive off prepayment fees on fixed rate loans.
Plot Loan Eligibility
- Resident Indians are eligible to apply for a plot loan. NRIs who wish to buy a plot for constructing their residential property can apply for a home loan.
- Age: Lenders generally offer plot loans for fresh loan applicants/existing borrowers (in case of balance transfer) aged between 18 to 70 years.
- Salaried and self-employed individuals/business owners are eligible
- Credit Score: Loan applicants with credit scores of 750 and above have a higher chance of availing plot loans. Many lenders also offer lower interest rates to applicants having higher credit scores.
Other factors that individual lenders might look at while determining the eligibility of plot loan applicants include an applicant’s income, liabilities, assets owned, work experience (for salaried) and business continuity (for business owners), etc.
Documents Required for Plot Loans
The documentation process for a plot loan is not very different from a home loan. Following are some of the main documents required in order to apply for a plot loan:
- Duly filled application form
- Age proof
- Income proof
- Proof of employment/business
- Address proof
- Plot/land-related documents
- Layouts/drawings of the plot (approved by the respective authority)
Note: This list is non-exhaustive. Additional documents may be required based on the applicant’s profile and the provider’s requirement.
Plot Loan EMI Calculator
Monthly EMI ₹ 15,622
Total Amount Payble ₹ 5,62,395(Principal + interest)
Principal Amount ₹ 5,00,000
Total Interest Payble ₹ 62,395