Table of Contents
- What is a Plot Loan and How is it different from Home Loan?
- The key differences between plot loans and home loans are:
- Plot Loan Eligibility Criteria in India
- Banks Offering Plot Loans and their Interest Rate - 1. State Bank of India
- 2. ICICI Bank
- 3. HDFC Bank
- 4. Bank of Baroda
- 5. LIC Housing Finance
- Tax Benefits on Plot Loans in India
- Eligibility Criteria for Availing Tax Benefits on Plot Loans in India
- Conclusion
- Faq's
Plot loans, also known as land loans, are a popular financing option for individuals looking to purchase a plot of land for residential or commercial purposes. These loans allow borrowers to pay for the land in installments, making it more affordable and accessible.
The most important metric to look at while opting for a plot loan is the interest rate. Along with this maximum loan amount eligibility, maximum tenure allowed, processing fees are other factors an individual should consider.
In India, several banks and housing finance companies (HFCs) offer plot loans with varying interest rates, tenures, and eligibility criteria. In this article, we will take a look at some of the best banks for plot loans in India. The charges mentioned are available in 2024.
What is a Plot Loan and How is it different from Home Loan?
Plot purchase loan, is a type of loan provided by banks and housing finance companies
A plot loan, also known as a land loan or plot purchase loan, is a type of loan provided by banks and housing finance companies (HFCs) to individuals or businesses to purchase a plot of land.The purpose of a plot loan is to assist in buying a piece of land for various purposes, such as constructing a house, developing a commercial property, or investing in real estate.
On the other hand, a home loan is a type of loan that enables you to borrow money to buy a new residential house, an under-construction house, or to build your own home
Also Read: How to Save Tax on Rental Income?
The key differences between plot loans and home loans are:
Criteria | Plot Loans | Home Loans |
Purpose | Exclusively for purchasing land or plots | For buying a ready-to-move-in house, residential property, or under-construction property |
Interest Rates | Generally higher due to difficulty in determining plot value | Generally lower |
Eligibility Criteria | More complex; granted after careful verification and obtaining surety of intended plot use | Simpler eligibility criteria |
Tax Benefits | No tax benefits available | Tax benefits on both interest and principal payments |
Loan Tenure | Shorter tenure, usually 10 to 15 years | Longer tenure |
In conclusion, a plot loan is specifically designed to finance the purchase of land, while a home loan is used to buy a residential property or construct a house. The choice between the two depends on the borrower's specific goals, financial situation, and long-term plans.
Plot Loan Eligibility Criteria in India
When applying for a plot loan in India, various banks and financial institutions have specific eligibility criteria that applicants need to meet. Here is a summary of the standard eligibility requirements for plot loans:
Nationality:
Applicants must be Indian residents or Non-Resident Indians (NRIs).
Age Limit:
Primary applicants should typically be between 23 to 60 years for resident Indians and 25 to 60 years for NRIs.
Co-owned Property:
Some banks and Housing Finance Companies offers better interest rates to women as co-applicants, encouraging them to apply. Adding a wife or mother as a co-applicant can lead to lower interest rates, even if they are not earning. For eg ICICI and SBI.
Co-applicant Age Limit:
Co-applicants should be between 18 to 65 years old.
Why Add a Co-applicant:
Adding a co-applicant, even if they are not earning, can increase plot loan eligibility and allow for a larger loan amount. ICICI HFC provides better interest rates to women who apply as co-applicants.
These eligibility criteria are crucial for individuals seeking plot loans in India. Meeting these requirements enhances the chances of loan approval and ensures a smoother application process.
Applicants should carefully review and fulfill these criteria before applying for a plot loan to increase their chances of securing the financing needed for land purchase.
Also Read: Understanding the Basics of Home Insurance Policies
Banks Offering Plot Loans and their Interest Rate - 1. State Bank of India
Banks Offering Plot Loans and their Interest Rate
1. State Bank of India (SBI)
SBI, the largest public sector bank in India, offers plot loans at competitive interest rates ranging from 9.40% to 9.85% per annum. According to the company website, the CIBIL score must be 750 and above.
The bank has a wide network of branches across the country, making it easily accessible to borrowers. SBI offers a maximum loan amount of Rs. 15 crore and a maximum tenure of 10 years.
The construction of the house should be completed within 3 years from date the loan has been sanctioned/disbursed. The customer can also avail another Home Loan for construction of house on the plot financed under SBI Realty.
Features of SBI on Plot Loans
- No Penalty No pre-payment penalty on re-payment of payment
- Low Processing Fees of 0.35% of the loan amount + taxes, subject to a minimum of 2000 and a maximum of 10000.
- Tenure is up to 10 years
- Interest Concession for Women Borrowers
2. ICICI Bank
ICICI Bank, a leading private sector bank, provides plot loans at interest rates starting from 8.90% per annum for Salaries Individual. The bank offers a maximum loan amount of Rs. 3 crore and a maximum tenure of 20 years. ICICI Bank has a user-friendly online application process and a network of branches across India.
Features of ICICI Bank Plot Loan
Higher Loan Amount
Repo Linked Interest Rate
Instant Approval & Swift Disbursal
High Tenure of up to 30 years available (land + construction) with additional tax benefits
Low processing fee and no pre-payment penalty can be availed along with the land loan
Balance Transfer Facility
Slab | Salaried Borrower | Self-Employed |
Up to ₹ 35 Lacs | 8.90% - 9.90% | 9.25% - 10.05% |
₹ 35 - ₹ 75 Lacs | 8.90% - 10.05% | 9.25% - 10.20% |
Above ₹ 75 Lacs | 8.90% - 10.15% | 9.25% - 10.30% |
3. HDFC Bank
HDFC Bank, another prominent private sector bank, offers plot loans at interest rates starting from 8.50% per annum. The bank provides a maximum loan amount of Rs. 10 crore and a maximum tenure of 15 years.
HDFC Bank has a strong presence in urban and semi-urban areas, making it accessible to a wide range of borrowers.
Eligibility Criteria for HDFC Bank Plot Loan
- Age: 21-65 years
- Profession: Salaried and Self-Employed Professionals (Doctors, CAs, lawyers, Engineers, CS, Consultants) and Self-Employed Non-Professionals (Contractor, Trader, Commission agent)
- Nationality: Indian Resident
- Genders: All
HDFC Bank may also check credit score and monthly income of its home loan applicants while evaluating its eligibility criteria
HDFC Bank Plot Loan Highlights | Details |
Interest Rate | 8.70% p.a. onwards |
Tenure | Up to 15 years |
Loan Amount (LTV Ratio) | |
Up to and including Rs 30 lakh | Up to 80% of property cost |
Rs 30.01 lakh - Rs 75 lakh | Up to 80% of the property cost |
Above Rs 75 lakh | Up to 75% of property cost |
Processing Fee | |
For Salaried | Up to 0.50% of the loan amount or Rs 3,000, whichever is higher plus taxes |
For Self-Employed Professionals | Up to 0.50% of the loan amount or Rs 3,000, whichever is higher plus taxes |
For Self-Employed Non-Professionals | Up to 1.50% of the loan amount or Rs 4,500, whichever is higher |
4. Bank of Baroda
Bank of Baroda, a public sector bank, provides plot loans at interest rates ranging from 8.90% to 10.90% per annum. The bank offers a maximum loan amount of Rs. 10 crore and a maximum tenure of 30 years
BoB has a wide network of branches across India and offers competitive interest rates.
Features of Bank of Baroda Plot Loan
Low Interest Rates
Low Processing Fee
No Hidden Charges
No Pre Payment Penalty
The interest rate is linked to Baroda Repo Linked Lending Rate (BRLLR) of the bank and is reset monthly.
Interest charges on Daily Reducing Balance
Repayment up to 30 years
Moratorium period of up to 36 months after the loan amount is disbursed.
Accept mortgages of the constructed or purchased property as collateral. In some cases, collateral for home loans can be accepted in the form of insurance policies, government promissory notes, shares and debentures, gold ornaments and other property etc.
Floating Rate
Product | Conditions | Repo Rate + Spread | Effective Rate of Interest |
Baroda Home Loan to Non-Staff members | For Salaried | BRLLR to BRLLR + 1.35% | From 9.15% to 10.50% |
For Non-Salaried | BRLLR + 0.10% to BRLLR + 1.45% | From 9.25% to 10.60% | |
Note: | |||
Rate of Interest is dependent upon Loan limit and CIBIL Score of the applicant/s. | |||
Risk Premium of 0.05% will be levied for customers not obtaining credit insurance cover |
Fixed Rate
Product | Conditions | Repo Rate + Spread | Effective Rate of Interest |
Baroda Home Loan to Non-Staff members | For Salaried | BRLLR + 1.00% to BRLLR + 2.35% | From 10.15% to 11.50% |
For Non-Salaried | BRLLR + 1.10% to BRLLR + 2.45% | From 10.25% to 11.60% |
Processing Charges
Loan Amount | Processing Fee |
Up to Rs. 50 Lakh | 0.50% of loan amount subject to Min. Rs. 8,500 and Max. Rs. 15,000 |
Above Rs. 50 Lakh | 0.25% of loan amount subject to Min. Rs. 8,500 and Max. Rs. 25,000 |
5. LIC Housing Finance
LIC Housing Finance, a leading HFC, offers two kinds of plot loans - purchase of plots from
Govt bodies/development authorities/approved layout, and second-composite loan towards purchase of plot and house construction.
The Maximum Loan amount for Plot purchase from Govt bodies/development authorities/approved layout is 75% of property Value and the Maximum Loan term is 15 years.
While, The Maximum Loan amount for second-Composite loan towards purchase of plot and house construction is 60% of property Value and if the applicant intendes to complete the consdtuction within 3 years from the date of plot purchase. Maximum Loan term is 30 years.
LIC Housing Finance Plot Loan Features
Online plot loan sanction facility
Quick sanction and low EMI
Simple documentation
Amongst the lowest rate of interest
Takeover or balance transfer of existing Home Loans Possible.
LIC Housing Finance Interest Rate on Plot Loan
Interest Rate on Plot Loan | Select CIBIL Range | Select Occupation Type | Interest Rate | Loan Amount | Rate Type |
CIBIL >= 750 | Salaried and Professional | 8.70% | Up to 2 Crs | Floating - Linked to LHPLR | |
8.90% | More than 2 Crs & up to 15 Crs | Floating - Linked to LHPLR | |||
CIBIL >= 750 | Non-Salaried and Non-Professional | 8.80% | Up to 2 Crs | Floating - Linked to LHPLR | |
9.00% | More than 2 Crs & up to 15 Crs | Floating - Linked to LHPLR |
Also Read: What is CIBIL Score And How it is Calculated For Home Loan
Tax Benefits on Plot Loans in India
Tax Benefits on Plot Loans in India
Tax benefits on plot loans in India are governed by specific provisions under the Income Tax Act, providing opportunities for borrowers to save on taxes when purchasing land for residential or commercial purposes.
Interest Deductions:
Interest payments on plot loans are eligible for deductions under Section 24 of the Income Tax Act, allowing borrowers to claim deductions of up to Rs. 2 lakh annually. To qualify for this benefit, the loan must be converted into a conventional home loan, and the borrower must reside in the constructed property.
Principal Repayment:
Under Section 80C of the Income Tax Act, borrowers can avail deductions on the principal repayment component of the plot loan, up to a maximum of Rs. 1.50 lakh per year> This deduction includes the actual loan amount borrowed and certain fees related to the property transfer and registration, paid in the year of construction completion.
Construction Requirement:
Tax benefits on plot loans are only applicable if the borrower constructs a house or building on the purchased plot. These benefits are available once the construction is completed, and the borrower starts living in the newly constructed property.
Additional Benefits:
Opting for a plot loan to construct a house can lead to lower interest rates, reducing the overall repayment amount
Pre-construction interest reduction is also possible, capped at Rs. 2 lakh annually, and applicable only if the borrower or their family resides in the newly constructed property
Having a thorough understanding of the tax benefits associated with plot loans is essential for borrowers looking to maximise savings while investing in land. By leveraging the provisions of the Income Tax Act and meeting the necessary requirements, individuals can make informed decisions when availing plot loans in India.
Also Read: Income Tax and Property Gains: Essentials of E-Filing PortalEligibility Criteria for Availing Tax Benefits on Plot Loans in India
To avail tax benefits on plot loans in India, borrowers must meet specific eligibility criteria outlined under the Income Tax Act. Here is a detailed overview based on the information provided in the sources:
Intended Use of the Plot:
Tax benefits on plot loans are contingent on the purpose of the plot purchase. To qualify for tax benefits, the plot must be acquired with the intention of constructing a building or house on it
Completion of Construction:
Tax benefits can only be claimed after the completion of construction on the plot. Once the building is finished, borrowers become eligible to avail of tax exemptions on both the plot loan and the subsequent home loan taken for construction
Principal Repayment:
Under Section 80C of the Income Tax Act, borrowers can claim deductions on the principal repayment component of the plot loan, subject to a maximum annual deduction of Rs. 1.5 lakh
The principal repayment amount includes the loan amount borrowed for the plot and certain fees related to property transfer and registration.
Interest Payment:
Deductions on interest payments of a plot loan fall under Section 24 of the Income Tax Act. However, this benefit is only applicable if the borrower constructs a building on the plot and converts the plot loan into a home loan. The maximum annual deduction for interest payments on a self-occupied property is Rs. 2 lakh.
Occupancy Requirement:
To claim tax benefits, borrowers must reside in the constructed property after completion. If the property is rented out instead of self-occupation, the interest deduction may not be applicable
Conclusion
Plot loans are a vital financing option for individuals looking to purchase land for residential or commercial purposes. With various banks and housing finance companies offering plot loans, it is essential to understand the eligibility criteria, interest rates, and tax benefits associated with these loans. By choosing the right lender and meeting the eligibility criteria, borrowers can secure the financing needed to purchase land and construct their dream property.
Moreover, understanding the tax benefits available on plot loans can help borrowers optimize their savings and reduce their tax liability. By converting the plot loan into a home loan after construction and meeting the occupancy requirements, borrowers can claim deductions on both the principal and interest components of the loan.
It is safe to say that plot loans offer a convenient and accessible way to finance land purchases in India. Whether for residential or commercial purposes, plot loans can be a valuable tool in fulfilling one's property aspirations.
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