Planning to buy a plot of land to build a house on it? All housing finance banks offer plot loans. The typical plot loan is taken to buy a plot of land to build a house on it—only for that specific purpose. The plot of land is to build a residential building only. It is not for building a commercial establishment or agriculture use. The plot loan carries a higher interest rate than a home loan.

What is a plot loan?

To reiterate, a plot loan is to buy a piece of land or plot. This should not be confused with a loan against plot. There are two types of plot loans – a loan to buy a residential plot and a loan to buy a plot of land to construct a house. The second kind is more prevalent because of the lower risks involved. Again, plots of land from government agencies are given preference. You can use the plot loan eligibility calculator available at the lenders’ site to see how much loan you can and at what interest rates.

Plot loan benefits

Easy access is one plus point. With a plot loan, you acquire a valued piece of land. Two, the lending rates are competitive. Three, tax benefits under Section 80C and Section 24 of the Income Tax (IT) Act can be availed. Last, there is no prepayment charge if the plot loan is closed prematurely.

Eligibility

  • Buyer must be local resident
  • Employed/self-employed
  • Earning an income
  • Above 18 years of age
  • Those over 65 are not given plot loan 

Documents Required

With the application, the borrower has to submit various documents. These include papers for identity proof and age and address proof. Also, valid and appropriate income proof! Also, any “land” papers. Here’s a list of documents that qualify under various heads.  

For Identity, Age, Address

  • 3 passport-size photographs
  • Aadhaar card
  • Passport
  • Voter ID card
  • Driving license
  • Electricity or water bill
  • Bank statement /copy of passbook reflecting address
  • Rent agreement
  • Sale deed

Income Proof for the Salaried

  • PAN card
  • Salary slips for the last three months
  • Form 16 of past two years
  • Bank statements of past three months

Income proof for Self-Employed People

  • PAN card
  • Certificate of qualification for professionals
  • Last three years’ income tax returns
  • Bank statement for the last 12 months

Property Documents

  • Allotment letter/buyer agreement
  • Title deeds
  • Agreement of sale
  • Sale deed
  • Registration and stamp duty receipt
  • NOC from the builder
  • Development agreement

How to apply and what is the maximum loan amount?

Visit any bank’s branch or apply online via the official portal of the bank. The maximum amount offered would be 70 to 90 percent of the purchase price of the plot. The buyer will have to arrange 10-30 percent on his own. This will include stamp duty and registration fees. Different banks may vary the maximum amount offered. All leading banks offer plot loans. Don’t forget plot loan is to construct a house on it, not just to buy a plot and leave it at that.   

Summing Up

If you want to buy a piece of land to build a house, most lenders will be happy to give you a plot loan provided you fulfil the eligibility criteria. You can use the plot loan eligibility calculator to check your eligibility for the loan and others details. However, you should not confuse a plot loan with a loan against plot which means taking a loan by putting a piece of land as a mortgage.

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