People in India like to invest both in land and home, but there are some who prefer to buy only land as they know that land value appreciates better then the value of the home. Generally, it is bought for investment purpose or to construct a home on a later date. In such case you are eligible for a land loan. Bank generally offers home loan only to buy a home that is under construction, ready to move or the one which is upcoming. For purchasing a plot, buyer has to request land loan. For both these loans, the term and conditions and rates are the same but there are a few minute differences that are outlined below:
Type and location of the property
Think home loan, and its available for all kind of properties, it does not matter what type it is and where the location is. But land loan is only for a residential plot, you cannot claim it for buying an agricultural land or any other type of land. One thing to note is that the land for which you are requesting loan should be within the corporation or municipal limits.
Lower LTV (Loan to Value)
LTV means, the quantity of loan you can get against the property. Generally, in a home loan, one can avail loan up to 80 to 85%, but for a land loan, the maximum limit is 70% of the plot value. That is, you have to shell almost 30% of the funds from your own pocket.
Cap on Maximum loan amount
Almost all the banks have a maximum limit on land loans. Indian Bank and PNB (Punjab National Bank) have a cap of Rs. 1 crore and 50 lakh respectively on land loans. So before you go in for a land loan, find out the maximum limit on loan amount before shortlisting your lender. This will help you if you are willing to invest a large amount.
Land purchased to construct home
If you have got land loan and intend to construct a home on it on a later day, then you can inform this to your lender. The banks have certain schemes available for such situations. The bank might ask you to start the construction on a stipulated period of time. For example, SBI Bank offers land loan on condition that the owner will start construction of the home in the next 2 years, While, ICICI Bank says that the construction to be completed in next two years from the date of availing the loan amount.
The land loan is similar to home loan, except a few conditions. Besides that, the process and requirement of documents and the loan interest rate are all completely similar.