Just paid back your home loan and are now the proud owner of your own apartment ? This is a great achievement but is it enough? You feel a sense of dissatisfaction. You paid a visit to a friend recently, who showed you a beautiful piece of residential land, he had recently purchased. You feel restless. You can’t help wondering, if you can avail a land loan to buy a residential plot of land.
You can avail a land loan either to invest (buy plots of residential land), or to construct a house. If you want to buy a vacant plot of land as an investment (buy now and sell at a higher price), you must avail a land loan and not a home loan. If you are a resident Indian, you can avail a land loan and then construct a home on the plot of land. or simply buy it as a future investment.
You can avail a land loan, only for the purchase of a residential plot of land and not an agricultural plot of land, or even land in a village. The residential plot of land should be within Municipal/Corporation limits. In case of Bangalore, you get a land loan only for A Khatha residential plot of land.
Only a maximum of 60-75 % of the cost of the residential plot of land, can be availed as a land loan. You will have to pay 30% of the cost of land, from your own pocket.
The maximum tenure most banks offer you for a land loan, is 15 years. The average tenure of a land loan is 5-15 years. The tenure of a land loan is much lower than a home loan, which can go up to even 30 years.
You get no tax benefits, if you avail a land loan to buy a residential plot of land and leave it vacant. If you rent out the plot of land, the interest you pay on the land loan is eligible for a tax deduction.
So yes, you can avail a land loan to buy a residential plot of land. However look out to buy a developed plot of land, as this can save you from a lot of hassles.
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