Indian investors are usually inclined towards buying land either purely as a good investment and for building a home. Therefore, if you’re looking to buy a plot, you may not qualify for a mortgage, however for a land loan. Home loans can be obtained only for the home already built, under construction or more likely to undergo construction quickly. For funding the purchase of a vacant plot, you’ll have to try using a land loan alternatively. Even though terms, rates and operations linked to land loans are just like compared to a mortgage, there are a few differences that are intrinsic the two as outlined below:
The distinctions between land loan and house loan
Property venue and Type: Unlike mortgage loans that are available on all properties aside from their location or kind, you might get a land loan limited to a plot that is residential. Additionally, “the property ought to be situated within municipal or organization limits. Consequently, you can’t get financing for purchasing an agricultural land, or even for buying an item of land in a town. You could aim for a true home loan, for constructing your home for the reason that bit of land, following the purchase,” claims Adhil Shetty.
Lower LTV: Loan To Value (or LTV) could be the quantum of loan you may 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’re considering buying a plot for either individual usage or as a good investment, you would need to shell a minimum out of 30% associated with funds from your pocket.
No Tax Benefits: Unlike a housing loan, that is qualified to receive income tax deduction for re payment of both interest along with the major amount, land loans try not to provide any such advantage. “You can avail income tax deductions as long as you will be constructing a property within the plot. The deduction for the reason that instance does apply just for the mortgage amount taken against construction, and just after conclusion associated with construction activity,” informs Shetty.
Land Loan and NRIs: Non Resident Indians are really a segment that is potential of buyers in Asia. An extensive search is required if you are a Non Resident Indian and seeking to purchase a plot through a land check city flamingo loan. Most of banks try not to provide land loans to Non Resident Indians. No matter if provided, they might come at an increased interest rate.
Lower Tenure: The loan tenure for land loans is gloomier in comparison to housing loans. The most loan tenure designed for land loans is fifteen years while for a mortgage one could get as much as 30 years’ tenure. Nevertheless, some NBFCs like Dewan Housing Finance provide 20-year tenure for land loans.
Cap on optimum Loan Amount: Many banks keep a maximum limit that is upper land loans. “Indian Bank and Punjab nationwide Bank, as an example, stipulate maximum loan option of Rs 1 crore and Rs 50 lakh correspondingly for sale 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.