We know that when you want to buy your home, you apply for a loan in the bank, but if someone wants to buy a land and then construct a home, will the bank offer loan? The answer is, yes, of course, mostly all the banks in India offer loans to people to buy a land as well as to construct their dream home. This loan can be availed by a salaried person, self-employed person and an NRI can apply for it.
What kind of land can be purchased?
People interested in buying an agricultural land, cannot avail a land loan. When we say land loan, it’s meant only to procure land for residential purpose. Some of the banks add few clauses like; the construction should begin within 6 months or the plot should be within municipal limits.
How is it different from home loan?
You cannot claim income tax deduction on interest paid on such loans. However, when you take a loan for construction purpose on the plot, you are eligible for a tax break, that is, you can claim tax benefits on both loan (land purchased and house construction). The tax deductions on these loans can be claimed in the year in which construction is completed and the completion certificate is submitted to the concerned authorities. The interest rate on a land loan is similar to what is charged on a home loan.
How much you have to pay as a down payment?
People opting for land loan have to pay a hefty down payment, it can be around 70% of your loan amount, but if you are applying for a home loan, then you just have to pay 20% of the cost of the property.
What are the documents that are needed?
- Layout drawing, approved by town planning authority
- Original documents, like, tax receipts, revenue receipts, etc
- Land ownership documents
- Land records
- NOC from society
- Transfer of land documents
- No encumbrance certificate
Please note, that you hire a lawyer to verify all the documents before proceeding.
Investing in a plot and constructing a house in it is a good decision, but the constraint is the cost of construction. Sometimes it may be expensive and take a longer time to complete also; it solely depends on your financial circumstances. The benefits of construction are: you can input your own creative ideas into it, the design, colour schemes, etc. Apart from that, you also have the choice of postponing major expenses, like expansion and renovations on a later date.