Plot/land loans can be obtained for agricultural purposes or if the land has been approved for house construction, it can be obtained for constructing your home in the near or distant future. Not every bank is keen on lending for land purchase as they foresee difficulties in documentation and protection of land against encroachments.
With close knit community living becoming a well-established trend today, the percentage of people buying apartments is on the rise, compared to those buying plots and building their own homes. However, a large section who have an aversion to closed spaces, love the idea of an independent house with a sprawling lawn and a vegetable garden in the backyard. If you have your own savings to buy a land upfront, good for you. Else you could try the option of a land loan. Here are some insights into land and plot loans, if you are planning to opt for one.
You do need to be aware though for various, which we shall list below land loans are never stand-alone. There are also no tax benefits involved. If you avail of a loan for construction to build a house on the land you’ve bought, then the tax benefit applies to the composite amount. Also, note that tax deductions are only applicable in the year that the construction is completed. Land loans, effectively, are home loans.
Here are some details you need to be aware of when you make a decision to opt for a land loan:
a. Plot/land loans can be obtained for agricultural purposes or if the land has been approved for house construction, it can be obtained for constructing your home in the near or distant future.
b. Not every bank is keen on lending for land purchase as they foresee difficulties in documentation and protection of land against encroachments.
c. When a bank does lend for the purchase of land, it insists on purchase from a co-operative society or a development authority. In some instances they also permit purchase of land from the developer.
d.Tenures for a plot loan are usually shorter compared to home loans and the interest rates are also higher by a few percentage points.
e.Tax rebates for purchasing land loans are not available and if the house is under construction on the land purchased, then the tax benefits become available only when the construction is completed.