Plot loans, also called Land loans, are made available by banks and Housing Finance Companies (HFCs) to clients who intend to use the money to buy a piece of land and build a home. While some financial institutions provide dedicated “land loans,” others let borrowers utilise the profits from a standard “house loan” to buy a piece of land and build a home.
Lenders often stipulate that borrowers of Plot Loan finish building their properties within a specific time frame after the loan’s approval and disbursal.
Benefits of a Land Loan
People usually take Land Loans to:
- Invest in land as it often pays off well when sold.
- Purchase plots at prices comparable to those of identical houses.
- Construct a home as per the architect, tailoring every detail to their tastes.
Interest Rate on a Loan
Plot Loans are often made available by lenders with variable interest rates. Borrowers’ interest rates are determined by the lender based on information provided by the borrower, such as their credit history, loan amount, monthly income, vocation, company size, etc.
As a result, interest rates on Plot Loans are often the same as or slightly higher than those on conventional mortgages. For example, the interest rates at Kotak Mahindra Bank begin at 7.99% and go up from there.
Ways to Apply for a Land Loan Online
- You may find the Land Loan web page on the Kotak Mahindra Bank website. If you go there, click on the ‘Explore Products’ link, then hover over ‘Loans.’
- To apply, please visit the website and click the “Apply Now” button.
- Put in your name, age, profession, income, employment information, etc.
- To begin, please provide the information about your property.
- Submit your application fee now.
- A relationship manager from Kotak Mahindra Bank will give you a call and walk you through the loan approval and disbursement procedures.
- Scan and submit any required paperwork.
- Go ahead and hit the send button.
Documents Required for Land Loan
You’ll need minimum paperwork when applying for a land loan. Different lending institutions may have varying paperwork standards due to differing requirements for loan approval.
- Application form filled with complete information
- Photograph of the applicant
- Identity documentation
- Validation of residency
- Recent pay slips
- Bank statements
- Form 16
- Proof of land ownership in its original form
- “Free and Clear” plot certificate
- Site plans authorised by the local zoning board
- Registration of property
How to Avoid Paying Taxes on a Land Mortgage?
Only if you build a home on the plot can you qualify for tax breaks related to the loan. Once a building construction is finished, only then are tax breaks available. You may deduct the principal repayment portion of your loan payments up to INR 1,50,000 per year in Section 80C of the Income Tax Act.
After completing the home’s construction and occupancy, you will be eligible for Section 24 tax advantages related to the interest paid on the loan. An annual deduction of Rs.2 lakh is available under Section 24 of the Income Tax Act. Unfortunately, you’ll need to refinance your plot loan into a standard mortgage to take advantage of this.
Land Loan Mortgage calculator
The mortgage calculator helps customers determine their monthly EMI payments. In addition, the lender’s Home Loan EMI Calculator is available to customers. This is crucial since it allows clients to accurately predict their monthly EMI payments before applying for a loan. This facilitates long-term preparations.
Summing Up
When deciding whether to take out a land loan to construct a house, it is essential to consider the pros and cons of doing so. Of course, it’s exciting to imagine building your ideal home, but you should be all set for the responsibilities of securing a land loan or plot loan.
