Real estate investments demand a significant spend of money, and understandably, not all investors can pay a lump sum when buying a property. In such a scenario, one might look out for availing a loan. However, is it possible to get a loan for buying a plot?
The good news is- Yes.
In this blog, we will discuss the various aspects of plot loans and understand if there is an easier way out.
Plot Loan: A Brief Overview
A plot loan (or land loan) is a type of loan provided by banks and financial institutions to purchase a piece of land on which you will build a house at a later stage. However, a residential plot loan is different from a home loan, which is specifically meant for buying a residential property (like a flat) or for constructing a house.
Everything You Need to Know Before Getting a Loan for Your Residential Plot
Although several banks and financial institutions provide plot loans, there might be specific requirements that need to be fulfilled, which could vary from one institution to another.
- Purpose of the Loan
Most lenders insist that the plot of land should be used for residential purposes in the future. This means that even if you don’t have immediate plans to construct a house, you might need to declare your intent to build a residential property on the plot within a stipulated time frame (typically 2-3 years). This helps in ensuring that the plot does not remain vacant for an inordinately long period.
- Location and Type of the Land
Lenders usually prefer financing plots situated in areas that have promising growth prospects or are in well-developed localities. Additionally, your property should be situated within the city/municipal limit.
- Loan Tenure
Plot loans often come with a shorter tenure than home loans, usually up to 15 years. This is due to the higher risk associated with lending for land purchase as compared to a house.
- Interest Rates
The interest rates on plot loans depend on factors like credit score and loan amount. However, if you fail to construct the house on the plot within 2 to 3 years as mentioned above and do not submit the requisite documents like a completion certificate to the bank, your loan will be converted to a normal loan. Besides, the interest rates will be increased by 2-3% with a retrospective starting date according to the agreement you have signed with the lender.
- Loan-to-Value (LTV) Ratio
Banks and financial institutions typically offer a lower Loan-to-Value (LTV) ratio on plot loans. LTV shows how much of the plot’s total price you can borrow. A typical LTV is as follows –
- 90% for loans up to ₹ 20,00,000
- 80% for loans up to ₹ 75,00,000
- 75% for loans above ₹ 75,00,000
- Eligibility Criteria
Before approving a plot loan, the lender may evaluate your credit history, financial stability, income, and age among other factors to minimize the risk of default. Therefore, it is essential to maintain a good credit score, preferably 650 or above, and ensure that all necessary documents are in place before applying for a plot loan.
What Other Options Do You Have?
If you face challenges in meeting any of the above-stated criteria, we at Swapnabhumi Newtown, offer an easy financing option to our investors in the form of our no-cost EMI plans. You simply need to pay 30% of the total amount during the time of agreement. And the best part, there is no stipulated time limit for constructing the house after initiation of the EMI plan as it is in the case of banks.
In a Nutshell
To sum up, it would be best to explore various banks and lending institutions, compare their offerings and interest rates, and choose one that best suits your needs and financial capabilities.
And it can’t get better when you choose to invest with a leading developer like Swapnabhumi, Newtown.
Swapnabhumi Newtown is a 500+ acres project with a variety of residential plot configurations and a wide array of amenities that promise to enhance the lifestyles of residents like never before. Plus, the convenient EMI plans are the cherry on top!