Buying land is a smart way to invest for the future, especially if you’re thinking about long-term growth or building later. Land loans work differently from regular home loans because banks see them as riskier. Many lenders offer special loans just for land purchases, but these come with their own rules and requirements. People take these loans to buy residential plots, farms, or commercial land, and each type needs different paperwork and checks before approval.
Understanding of Plot Loan or Land Purchase Loan
Unlike home loans, which are granted for ready-to-move or under-construction properties, plot loans are sanctioned only for buying vacant, non-agricultural residential land within municipal or development authority limits. This loan is typically for the purpose of building a residential or commercial property in the future.
Features of a Loan for Land Purchase
- Loan Tenure: The repayment period generally ranges from 10 to 20 years, depending on the borrower’s income and creditworthiness.
- Loan-to-Value (LTV) Ratio: Financial institutions typically finance up to 80% of the plot’s market value. Factors such as borrower profile, property location, and repayment capacity influence the LTV offered.
- Tax Benefits: Plot loans do not offer tax deductions under Section 80C or 24(b). However, tax benefits can be availed later if a home is constructed on the land using a construction loan.
- Balance Transfer Facility: Borrowers can shift their existing loan to another lender for a lower interest rate using the home loan balance transfer , subject to eligibility and credit evaluation.
- Fees & Charges: Processing fees range from 0.25% to 1.50% of the loan amount. While floating rate loans have no prepayment charges, fixed-rate loans may attract applicable penalties.
Plot loans are ideal for future home planning and long-term asset building.
Loan Interest for Land Purchase
Different loan interest rates for land purchases are as follows,
| No. | Bank | Interest Rate (p.a.) | Loan Amount/Eligibility | Special Notes/Conditions |
| 1. | SBI | 9.40% – 9.85% | CIBIL 750+ | 0.5% interest concession for women |
| 2. | HDFC | 7.90% – 13.20% (Repo +2.40%-7.70%) | Up to ₹30 L: 80%; ₹30.01-75L: 80%; >₹75L: 75% property cost | Depends on the property cost and the loan slab |
| 3. | Bajaj Housing Finance | Salaried: 7.49%Self-Employed: 7.85% | N/A | By employment status |
| 4. | ICICI Bank (Special) | Credit Score-Based | N/A | Tailored to credit score |
| 5. | ICICI Bank(Standard Slab) | Up to ₹35L: Sal 8.75–9.40%, SE 8.75–9.55%₹35–75L: Sal 8.75–9.55%, SE 8.75–9.70%>₹75L: Sal 8.75–9.65%, SE 8.75–9.80% | Based on slab and employment type | Sal = Salaried, SE = Self-Employed |
| 6. | Axis Bank | 8.75% – 12.55% | N/A | |
| 7. | Federal Bank | Plot: 8.80%+Home: 9.15%+ | Up to ₹35L: 9.25%Above ₹35L: Higher rate | MCLR linked, spread applies |
| 8. | Kotak Mahindra Bank | Starting @ 8.20% | N/A | Attractive for EMI reduction |
| 9. | Bank of Baroda | 7.45% | N/A | |
| 10. | Canara Bank | 6.90% – 8.90% | N/A |
Note: This information is applicable as of Jul 10, 2025. Check for the current interest rate at the individual website or visit the bank directly.
Eligible to Apply for a Loan to Buy Land?
- You must be an Indian resident, NRI, or Person of Indian Origin (PIO) living abroad for work, business, or other valid reasons.
- Most banks require applicants to be between 21 and 70 years of age at the time of loan maturity.
- Salaried individuals must have a stable monthly income with at least 1–2 years of continuous employment.
- Self-employed professionals or business owners should show a consistent business track record of 3 years or more for applying under the home loan for self employed category.
- Farmers may be eligible under select agricultural or rural land loan schemes, depending on landholding records and usage.
- A minimum credit score of 700–750 is typically required for better interest rates and higher home loan pre approval chances. Lenders also evaluate your repayment history and existing loan obligations.
- Final eligibility may vary based on the lender’s internal policy, your debt-to-income ratio, and the location of the land.
Maintaining a strong credit profile not only increases your eligibility but can also help you secure lower interest rates and better loan terms.
Documents Required to Get a Loan for Land Purchase
When applying for a land or plot purchase loan, banks and housing finance companies require a combination of identity, income, and property-related documents to assess your eligibility and the legal status of the land.
Personal Documents include,
- A duly filled loan application form with passport-size photographs
- Identity proof (Aadhaar card, PAN card, Passport, or Voter ID)
- Address proof (utility bill, Aadhaar, driving license, etc.)
- Age proof (birth certificate, Aadhaar, or passport)
Income Documents differ by profession,
- Salaried applicants must submit the last 3–6 months’ salary slips, 6 months’ bank statements, and Form 16 or latest ITR.
- Self-employed individuals need 2–3 years’ ITRs, business proof, and CA-certified profit and loss statements and balance sheets.
Property Documents required are,
- Land Title deed or registered sale deed
- Encumbrance certificate (usually for the past 10–30 years)
- Approved layout or site plan
- Latest land tax receipts and mutation/khasra/khata extracts
- Land revenue records proving clear ownership
Additionally, submit a cheque for processing fees, and if applicable, a Power of Attorney for NRI applicants.
Document requirements can vary by lender and land type. Always check the lender’s official checklist before applying.
Tax Exemption on Plot Loan
You get tax benefits on under-construction properties on a plot loan only after you build a house on the land. Homebuyers can enjoy dual tax benefits when opting for a plot plus construction loan. This means you can claim tax deductions not only on the loan taken to purchase the plot but also on the home loan used for constructing the house. Essentially, borrowers get a twofold tax advantage, making it a smart financial move for those planning to build their dream home.
Pros of Taking a Loan for Land Purchase
- Allows you to buy a plot now and construct your home later, offering long-term flexibility.
- Loan tenures can extend up to 30 years, easing repayment.
- As a secured loan, interest rates are generally lower than unsecured personal loans.
- Future construction on the plot can make you eligible for tax benefits under Sections 80C and 24(b).
- Many lenders offer balance transfer options for better rates and terms.
- Helps build a long-term asset while spreading financial outflow gradually.
Cons of Taking a Loan for Land Purchase
- You also need to mortgage the land to get the loan.
- You may face some challenges like market fluctuations, legal disputes, and a lack of data accuracy
- Getting approval is tougher because it involves a lengthy valuation process and paperwork.
Difference Between a Home Loan and a Land Loan
| Feature | Home Loan | Plot Loan |
| Purpose | This loan is only for buying a house. (ready or under construction) | This loan is only for land where you plan to build a house. |
| Tax Benefits | You get tax benefits on both interest and principal amounts | You get tax benefits only after building a house on the plot |
| Repayment Period | Can go up to 30 years | Usually available for up to 15 years |
| Loan Amount (LTV) | Lenders cover 75% to 90% of the property cost | Lenders cover 75% to 80% of the land cost |
Key Factors Affecting Land Loan Eligibility
- Your age plays a role in how much loan you can get.
- The assets you own help increase your loan eligibility.
- Banks check your repayment capacity before deciding the amount.
- A co-applicant’s income and assets can boost your loan limit.
- The security or collateral you provide affects the loan value.
- Your income stability and consistency matter a lot.
- Some banks follow fixed rules, while others check based on your full profile.
- Always ask your bank about its exact requirements before applying.
Conclusion
Land purchase loans offer worthy investment opportunities in real estate and future home building at the cost of greater expense and more stringent eligibility criteria than conventional home loans. Sound consideration of location, potential for development, and individual financial ability guarantees effective land loan use. For those who intend to build homes on land that they bought, Brick & Bolt provides end-to-end construction services with open-price quoting and quality guarantee, turning your investment in land into your dream house efficiently and professionally.
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