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Indian investors are typically inclined towards buying land either purely as a good investment or even for building a property.
Therefore, you may not be eligible for a home loan, but for a land loan if you are looking to buy a plot. Mortgages can be obtained limited to the home currently built, under construction or more likely to go through construction quickly. For funding the purchase of the vacant plot, you will need to opt for a land loan rather. Even though the terms, rates and operations associated with land loans are much like compared 
to a mortgage loan, there are numerous differences that are intrinsic the 2 as outlined below:
Property venue and Type: Unlike mortgages that are available on all properties regardless of their location or kind, you could get a land loan just for a plot that is residential. Additionally, “the property should always be found within municipal or business restrictions. Consequently, you can’t get money for purchasing a land that is agricultural or even for purchasing a bit of land in a town. You could go after a true mortgage loan, for constructing your home for the reason that little bit of land, following the purchase, ” claims Adhil Shetty, founder & CEO of BankBazaar.com.
Lower LTV: Loan To Value (or LTV) may be the quantum of loan you will get against a residential property. The maximum LTV is stipulated at 70% of the plot value at best while you can avail up to 80-85% funding in a home loan (90% in some cases), for a land loan. This effortlessly implies that if you should be considering purchasing a plot for either individual usage or as a good investment, you will have to shell away the absolute minimum of 30% of this funds from your own pocket.
No Tax Benefits: Unlike a housing loan, that will be qualified to receive income tax deduction for payment of both interest along with the major amount, land loans try not to provide any benefit that is such. “You can avail income tax deductions only when you might be constructing a home in the plot. The deduction for the reason that full instance is relevant limited to the mortgage quantity taken against construction, and just after conclusion for the construction activity, ” informs Shetty.
Land Loan and NRIs: Non Resident Indians are a segment that is potential of purchasers in Asia. An extensive search is required if you are a Non Resident Indian and seeking to purchase a plot through a land loan. Most of banking institutions usually do not provide land loans to Non Resident Indians. Whether or not provided, they might come at a greater rate of interest.
Lower Tenure: the mortgage tenure for land loans is gloomier in comparison to housing loans. The most loan tenure readily available for land loans is 15 years while for a mortgage you can get up to 30 years tenure that is. Nevertheless, some NBFCs like Dewan Housing Finance provide 20-year tenure for land loans.
Cap on Maximum Loan Amount: Many banking institutions keep a maximum limit that is upper land loans.
“Indian Bank and Punjab nationwide Bank, for instance, stipulate optimum loan option of Rs 1 crore and Rs 50 lakh correspondingly to buy of land. Consult your bank from the upper limitation on loan quantity if you are looking for a big ticket loan for investing in real estate, ” says Shetty before you shortlist your lender, as this can considerably affect your finances.
Loans for Land buy and House Construction: Besides these, if you should be deciding on a refinance choice for your land purchase with a state of being which you can expect to start the home construction quickly, there are several prerequisites. Many banking institutions have precondition to begin with construction in the acquired block of land in just a stipulated time frame. For example, “State Bank of Asia provides land loans only if the master promises construction for the home within a couple of years through the date of allotment of SBI Realty Loan. For ICICI Bank, the construction needs to be completed within couple of years through the date of availing very first disbursement for the loan, ” observes Shetty.
A land loan can be addressed within the mortgage options given by a bank and it is treated when you look at the in an identical way as compared to a mortgage.
The conditions that are above-mentioned really the only exceptions into the remedy for a land loan. The method and requirements like the bank’s research process, EMI choices, paperwork, requirement for co-applicants, interest, etc are identical both for mortgages along with land loans.