An Overview of Plot Loans in India

Banks in India offer a plot loan or land loan to people seeking to buy a piece of land. Individuals avail land or plot loans from a housing board, a real estate development company or via real estate agents. Buying a piece of land has always been a good investment option as the value of land generally appreciates over a period of time. Plot loans are a specialized or unique banking product designed and tailor-made to facilitate the purchase of land plots. They are often confused with home loans.

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Salient Features of Plot Loan         

Plot loans are cheap vis-a-vis home loans. Plot loan interest rates range from 8.70% to 12% a year. They come with minimal processing fees starting from 0.35% to 0.50% of the loan amount sanctioned. No pre-payment penalties are imposed by a majority of banks on plot loans. They are offered for a shorter tenure unlike home loans. Women borrowers get rebates or concessions on land plot loans. The loan to value ratio or LTV ratio is reasonable for plot loan borrowers.

Factors impacting the sanctioning of plot loan applications

Loan borrowers should have a good credit score in order to minimize the possibilities of loan rejections or get better deals. A credit score is a three-digit number that describes the loan repayment capabilities of an individual. Age is another influencer. The minimum age is 21 in most cases. The biggest factor impacting the sanctioning of plot loan applications is the annual income of the borrower. It in turn decides the loan tenure. For example, an individual with a good yearly income may opt for a shorter loan tenure to reduce the interest rate burden.

See Also: Home Loan Interest Rates Rising

Plot loans vs home loans

• Despite the type and location, home loans or housing loans are available on all properties. On the other hand, people can avail land loans only for residential plots and the properties must be located within the corporation or municipal limits.
• Home loans have a higher LTV ratio as compared to plot loans. Loan to Value (LTV) is the amount of loan one can get against a given property. The maximum LTV is set at 70% of the land value, while one can avail up to 80-90% funding in case of home loans.
• While home loans provide tax benefits, plot loans do not. You are allowed to avail tax benefits only when you construct a house in the plot called composite loans.
• Like mentioned earlier, the loan term for plot loans will be lower as compared to housing loans. For land loans, the maximum loan tenure is 15 years, but for home loans, the maximum tenure is 30 plus years.

State Bank of India plot loans 2019

SBI is a leading public sector bank in India and offers a huge array of financial products, including plot loans, for the benefit of consumers. One should have attained the minimum age of 18 years to avail a land loan from SBI. The loan is provided for a maximum term of 10 years. The maximum loan amount is set at Rs 10 Crore. SBI land loans have been clustered into 2 categories: 1) SBI realty loans and 2) agricultural land purchase schemes.

• One of the major financial burdens is buying or constructing a home. The SBI plot loans are special. They are offered to those willing to construct a house on the plot. The loan amount is required to be repaid via EMIs over a predetermined period.
• India is basically an agrarian nation wherein a major portion of the country’s labor force is involved in labor-centric occupation and agricultural. It is important to support them financially. The bank does provide mortgages to landless laborers and agriculturists for such requirements.

See Also: How to Select the Best Home Loan?

Eligibility criteria for SBI plot loans

1. SBI plot loans can be applied by small landless laborers and small agriculturists.
2. Loan seekers must have a good loan repayment history and must be Indian citizens.
3. The process of construction must begin within 5 years from the plot loan approval date.
4. The loan applicants should produce the required documents, including address and identity proofs.

Plot loans from HDFC

HDFC is a renowned brand among home loan buyers in India. People can also avail plot loans from this leading bank.

Key features

1. No hidden charges
2. Technical and legal counseling provided
3. Tailor-made loan repayment options and affordable interest rates
4. Loans for the purchase of plots via direct allotments and others

See Also: How To Reduce Home Loan Interest Rates?

HDFC plot loan interest rates

Loan Amount	Interest Rates
Up to Rs 30 Lakh for women	8.55-9.0%
Up to Rs 30 Lakh for others	8.60-9.10%
Above Rs 30 Lakh for women	8.85-9.35%
Above Rs 30 Lakh for others	8.90-9.40%
Up to Rs 75.01 Lakh and above for women	8.90-9.40%
Up to Rs 75.01 Lakh and above for others	8.95-9.45%

DHFL plot loans

• The maximum loan tenure is 20 years. It cannot be extended beyond the retirement age, which is 60 years.
• Plot loans can be sanctioned up to 75% of the value of the property or plot.
• KYC, income and property documents are required to be submitted.

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