New Delhi: Building your own house is everyone’s dream. Often people take the help of home loan to buy a house, but when it comes to buying just vacant land or a plot, many people get confused. Can one get loan from bank only for land? The answer is ‘yes’. If you are also planning to buy a plot in the year 2026, then ‘Land Loan’ can be a great option for you, although its rules are slightly different and stricter than home loan.
What are the conditions of land loan and bank?
Land loan or plot loan simply means that the bank lends you a certain amount to buy land. The bank gives this loan in the hope that you will build a house on that land to live in. Banks are often hesitant about purchasing vacant land for investment purposes. This is why many banks also impose a condition that you will have to start construction work on the land within the next 2 to 5 years of purchasing it.
Loan is not available on every land
Security is paramount for banks, so they do not invest money on every type of land. Generally, loans are available only on those residential plots which are approved by the Municipal Corporation, Development Authority or a registered builder. The residential status of the land should be clear in Khasra-Khatauni. On the other hand, banks are reluctant to give loans for purchasing agricultural land, disputed plots, non-residential land in villages or plots in illegal colonies. Banks closely scrutinize the documents, which include NOC, registry and map.
Who can apply?
Your eligibility for a land loan is largely the same as for a home loan. Your age should be between 18 to 65 years and credit score above 700 is considered good. Employed people have to show records, salary slip and Form-16 for the last 1-2 years. At the same time, those doing business have to submit ITR and balance sheet for 2-3 years. The bank ensures that you have enough money for the down payment and that you are able to repay the EMIs.
How much will it affect the pocket?
The biggest difference between home loan and land loan is the amount to be financed. In home loan, banks give a major part of the price of the house, but in land loan, usually only 60-70% of the value of the land is given as loan. Suppose if the plot is worth Rs 50 lakh, then the bank will give you only around Rs 25-35 lakh. You will have to pay the remaining 30-40% from your own pocket, which poses a challenge for many buyers.
Interest Rates and Time Frame
Loan taken for land is slightly more expensive than home loan. While home loans can be available at 8-9%, land loan rates can range from 8.5% to 10% or more. Talking about time, home loan is given for 20-25 years, but land loan is often given for 10-15 years only. Due to less time and slightly higher interest, its monthly EMI may feel heavier than that of a home loan. Therefore, before applying, make sure to assess your budget correctly.
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