Picture this: you found this land that has the perfect location and great resale value, and you could already imagine your dream home there. Everything is perfect except that you don't have enough savings to buy it outright. Such a situation calls for a plot loan, which can back you up financially to turn your dream into reality.
What is a Plot Loan?
A plot loan is financing for people buying a piece of land in the expectation of building a house later. Land loans differ from home loans in that these loans are intended solely for the purchase of land. Almost all banks and financial institutions now avail of plot loans under varied terms of interest and eligibility. However, the lenders provide loans for land located only in designated residential areas that will be feasibly developed in the future.What are the Plot Loans Interest Rate?
When thinking about getting a land loan, the most important part is the plot loan interest rate, which decides the total cost of borrowing. The plot loan interest rates typically start at about 7.85% per year but vary from lender to lender and depend on one's credit score and tenure of the loan borrowed. These rates vary with changing RBI guidelines and then the policies of the lender.Factors determining plot loan interest rates are considered by lenders: existing liabilities of the borrower, income, and repayment history. Here is the interest rate of top 10 banks:
| Name of Lender | Interest Rate |
|---|---|
| Union Bank of India | 9.00% – 10.95% |
| HDFC | 8.50% - 10.70% |
| Punjab National Bank | 8.65% - 9.60% |
| Federal Bank | 10.15% - 10.30% |
| SBI | 8.50% - 10.15% |
| Kotak Mahindra Bank | 8.85% onwards |
| LIC Housing Finance | 8.60% – 10.75% |
| Bajaj Housing Finance | 8.70% onwards |
| Tata Capital | 9.15% onwards |
| IDFC First Bank | 8.85% onwards |
Eligibility Criteria for a Plot Loan?
Lenders check if the buyer can repay the loan before approving a loan to buy land, just like they do for a home loan. The eligibility criteria are:
The applicant must be between 18 and 65 years old.
Self-employed people must have a steady source of income, while salaried people must earn at least ₹25,000 per month.
The likelihood of approval is increased with a high credit score.
Self-employed people must have at least three years of business experience, while salaried staff members must have at least two years of work experience.
The majority of banks will only finance 75–90% of the land's value as a loan to buy land.
Types of Plot Loans?
Buying land requires careful financial planning, and getting a loan depends on the purpose of the purchase. Lenders offer different types of loans based on how the borrower plans to use the land. Understanding these categories can help buyers choose the right loan option. Here are three main categories of land loans based on the borrower’s intent:Raw land loans: Loans for undeveloped land that lacks roads, utilities, or buildings are known as raw land loans. Because of their speculative character, they usually have the highest interest rates and down payment requirements.
Unimproved land loans: Loans for unimproved land are for properties that might have some minor upgrades (such as access to a road), but still don't have utilities or other infrastructure. Generally, the terms are marginally better than those for loans on bare land.
Improved land loans: These loans are for properties that are ready for construction and have the majority of the utilities installed. Among land loans, they frequently offer the best terms, coming in closest to conventional mortgages.
Documents Required for a Plot Loan
The documents Required for a Plot Loan are as follows:ID Proof – Aadhaar, PAN, Passport, or Voter ID
Address Proof – Aadhaar, Utility Bill, or Passport
Income Proof – Salary Slips, Bank Statements, or ITR
Property Documents – Sale Agreement, Title Deed, and Land Records
Employment Proof – Offer Letter or Work ID (for salaried)
Business Proof – GST Certificate or Business Registration (for self-employed)
How to Apply for a Plot Loan?
Applying for a loan to buy land requires proper documentation and meeting the lender’s eligibility criteria. Knowing the steps in advance can make the process smoother and faster. Borrowers should ensure they have a good credit score and the necessary paperwork ready. The application process for a loan to buy land is straightforward. Follow these steps:1. To find the best interest rates and qualifying requirements, check with several lenders.
2. To estimate the amount of your loan, use an online land loan eligibility calculator.
3. This includes bank statements, property records, evidence of identity, and proof of income.
4. Apply in person at a branch or online at the lender's website.
5. The vendor receives the loan amount promptly after it has been approved.
You should always keep in mind the plot loan you are buying has legal approvals and clear titles is advised. Due diligence is carried out by lenders, and disagreements over ownership or land classification may result in rejection.
