A Land Loan is used to fund residential land or plot purchases. Housing finance companies offer relaxed eligibility, high loan amounts, extended repayment term and minimal documentation, among other benefits. Read on to learn more.
Land Loan as Investment
Investing in a plot of land is always a profitable decision to make. You can build a house from scratch or sell it when the price appreciates. But soaring land prices have made it difficult for common investors to buy land with their own money.
A Land Loan is designed to fund residential land/plot purchases. You can apply for this if you purchase an allotted plot of land in a real estate housing project or society or purchase it from a development authority.
Land Loans offer relaxed eligibility, high loan amounts, extended repayment term, and minimal documentation, among other benefits.
What Are the Salient Features of Land Loans?
Like a Home Loan, a Land Loan is secured, meaning you have to pledge your land to get funds. So the original papers of the land remain with the lender until you repay the loan principal and interest in full.
Lenders usually evaluate the land’s zoning, boundaries, restrictions (if any), and locational advantages or disadvantages before approving the loan amount and interest rate.
The following are the salient features of Land Loans.
Affordable Interest Rate
Land Loan interest rates depend primarily on the loan amount, the borrower’s credit score, and the nature of the borrower’s income.
If the loan amount is under INR 35 Lakh, the rate usually ranges between 9.5% and 11.25% for salaried or self-employed professionals. The rate ranges between 9.55% and 11.65% for self-employed non-professionals.
High Loan Amount
The value of a Land Loan can be up to 75% of the plot’s current price. Hence, if your plot’s price is INR 1 Crore, you can get up to INR 75 Lakh from your lender.
You have to make a down payment when applying for the loan. The down payment amount differs from lender to lender.
You can apply for a Land Loan with only six to seven documents. The mandatory documents include the following:
- Your identity and address proof
- Income proof
- Latest degree certificate
- Income Tax Returns
- Bank statement
- Processing fee cheque
- Property (land) papers
Provide your passport-size photograph as well.
Land Loan eligibility depends on the borrower’s profession, credit score, age, loan tenure, and property cost.
For instance, any salaried or self-employed professional can apply for a Land Loan. You can expect the lowest Land Loan interest rate if your credit score is above 750. Also, your age should not exceed 70 years at loan maturity.
Extended Repayment Term
The repayment term of Land Loans usually ranges between ten (10) and fifteen (15) years. So you can get adequate time to repay your loan principal and interest.
You can also prepay your loan anytime during the repayment tenure by paying a small fee.
Convenient Application Process
The application process for a Land Loan is pretty convenient. You can visit the official website of a reputed lender, read the terms, calculate your eligibility and EMI using the free calculators, and apply for the loan instantly.
Since Land Loans are secured, your lender will send a valuer to examine your plot of land before negotiating the loan amount and interest rate.
You can contact your lender to insure your plot of land and loan repayments by paying a small premium. The insurer will pay your outstanding dues if you are unable to repay your loan due to an unfortunate event.
Buying a plot of land is a sensible decision, as you can either construct your dream home or make a profit by selling it later. Plus, under Section 80C of the Income Tax Act, you can claim tax deductions of up to INR 1.5 Lakh if you start the house’s construction immediately.