Avail a Land Loan and Buy a Residential Plot of Land

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.

What is a land loan?

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.

When can you avail a land loan?

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.

Will the bank sanction your land loan for the full amount of the 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.

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What is the tenure of your land loan?

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.

What are the eligibility conditions for you to avail a land loan?

• If you are 21 years and an Indian resident, you can avail a land loan from a bank or an NBFC. For Indian residents, land loans are available to both salaried as well as self employed, with a good repayment history. Some banks also offer land loans to non residents Indians, if the land is being bought to construct a house.
• You can get a maximum of INR 50 Lakhs as a land loan from most banks. Some banks do offer a maximum of INR 1 Crore as a land loan.
• The interest rates for availing a land loan are similar, or slightly higher than a home loan.
• You need to submit an identity and an address proof, for your land loan to be sanctioned. You also need to submit your income proof, which is the last three months salary slip. You need a good cibil score of 750. You also need to file ITR, for the last 2 years.
• You also need to show copies of the land allotment letter, title deed and sale deed of the land and if the property has been converted from agricultural land to non agricultural land, the DC converted certificate.

What are the tax benefits of availing a land loan?

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.