What are Benefits of Taking Plot Loan?

Some of the benefits of availing plot loans are listed below:

• Can be availed for purchase of residential land
• Attractive interest rates
• Affordable repayment tenures
• No pre-payment penalty
• Processing fee is low
• Minimal documentation
• Tax benefit under Section 24 and 80C of Income Tax Act

What is the Eligibility Criteria for Plot Loan?

The eligibility criteria which needs to be fulfilled in order to avail a plot loan are listed below:

• Must be a resident Indian
• Should be a salaried or self-employed applicant
• Should be between 18 and 65 years of age
• Compare: Plot Loan Eligibility

What are the Documents Required to Apply for Plot loans?

Listed below is the list of basic documents which you will need to furnish while applying for a plot loan. The documentation requirements are subject to change depending on the eligibility criteria laid down by different lending institutions.

• Duly filled Application form
• Applicant’s photograph
• Proof of Identity
• Proof of Residence
• Most recent salary slips
• Bank statement for the last 6 months
• Form 16
• Cheque for loan processing fee

Additionally, you may also be required to provide the following documents pertaining to the land.

• Original documents pertaining to ownership of the land
• ‘No Encumbrance’ Certificate for the plot
• Layouts / drawings of the plot, duly approved by the Town Planning Authority.
• Revenue receipts
• Land records
• Tax receipts for taxes paid by the landowner

Get Checklist: Documents Required for Home Loan

How to Get Tax Exempted from Plot Loan?

Tax benefits on plot loans can be availed only if you construct a house on the plot. The tax deductions can applicable only when the construction is completed. As per Section 80C of the Income Tax Act, you can avail deduction on the principal repayment component up to a maximum of Rs.1.50 lakh per annum.

You can also get tax benefits on the interest portion of the loan under Section 24 after construction of the house is completed and you start residing in the house. Under Section 24 of the Income Tax Act, you are eligible for an annual deduction of Rs.2 lakh. However, to avail that you need to convert the plot loan into a regular home loan.

In addition to this, you need also avail interest rate deduction and reduced interest rates for pre-construction.

What are the differences between Plot Loan and Home Loan?

• Plot loans are available for only a residential plot unlike home loans which are available on all properties.
• The maximum Loan to Value (LTV) when it comes to plot loans is stipulated at 70 percent. For home loans, the LTV can go up to 90 percent in some cases.
• Non-Resident Indians (NRIs) are not offered plot loans by most banks operating in the country
• Compared to home loans, the repayment tenure for land loans is lower.

FAQs on Plot Loan

1. Can plot loan be converted to home loan?Plot loans are approved only for the purchase of a residential plot of land and if the borrower has definite plans of building a house on the plot of land. Banks usually have a timeframe within which the residential property has to be completed on the purchased land. However, once the house has been completed, the completion or occupancy certificate can then be submitted to the bank after which the plot loan will be converted into a regular home loan. This gives the borrower the freedom to apply for tax benefits on the home loan as plot loans do not qualify for any tax deductions.
2. How can I get a land loan with bad credit?A good credit score is essential to get quick and hassle-free approvals for land loans. However, if you have bad credit, you can still hope to get a land loan sanctioned from a bank by taking a joint home loan with a spouse as your co-applicant, providing your spouse has a high credit score and a regular source of income. You can also approach the bank for a loan after improving your credit score, which can be done by clearing your past debts. You can also approach a bank with which you have an existing relationship or fixed deposits or other investments.
3. Are NRIs eligible for plot loans?Yes, Non Resident Indians are eligible for plot loans from banks in India. However, the plot loan can only be used to buy a plot of land for residential use and cannot be used for any other purpose.