Everyone has a dream to own a home. In India, buying a property is quite an apprehensive task for a middle-class person. Investing in real estate India used to be a tricky task earlier when getting the whole amount used to be difficult. However, these days, the scenario is completely changed. Due to higher scope in real estate India, more and more financial institutions are coming forward with their helping hand for the homebuyer. But somehow, a buyer is still confused over varieties of loans available.
Home loan Vs plot loans
Homebuyers in India have two types of choices when it comes to purchasing home
- Built-up/under-construction property or
- Residential plot
Usage is clear towards the residential requirement of the buyer, in the case of built-up property, the plot seems more abstract. But the financial institutions offer loans to buy both residential plot and residential property of real estate India.
There are so many differences between a home loan and a plot loan. To know them specifically keep reading on.
Plot loan or home loan look similar. But some key differences between the two are mentioned below.
Home loans are used for buying a constructed or under-construction property. While a plot loan is taken for buying a piece of land or plot which can be established later for residential purposes. Banks offer both the loans to applicants at good interest rates only when they fulfil the eligibility.
The plot bought out of a plot loan has no fixed deadline to its construction or usage as a residential house. However, usage is distinct as residential only. It’s your choice of constructing it or not. In case of a home loan, the applicants can use the loan amount to buy a developed residential property or for construction of a residential building through a real estate agent.
In the category of home loans, only property which is clear as residential succeeds for a home loan. No commercial land or property can be purchased. The properties which seek home loans can be
- freehold resale residential properties
- builder flats, or
- government-approved housing schemes
A home loan is not available for properties identified as commercial, agricultural or industrial. Plot loans are available for residential land only in Real estate India. However, the location of the plot should be within MCD or city limits and not in a rural community. Alike a home loan, a plot loan is not available for buying agricultural or commercial land.
Applicants can get tax profits on interest payment and principal amount in case of a home loan when applied on a fully built-up residential property. The buyer will get no tax benefits on plot loans. The only tax benefit available on plot loan if the loan amount is taken against the construction on it.
Loan tenure and EMI play a significant role in any loan application in real estate India. A home loan has a complex tenure as compared to plot loan. The tenure for a home loan can range up to 30 years while for a plot loan the extreme tenure could be up to 15 years. However, the tenure varies between various banks financial institutions in India.
Loan to Value (LTV):
Loan to Value (LTV) is the amount of loan the applicant can get against property or land. As a home loan is related to the acquisition of fixed collateral, LTV is higher as compared to a plot loan. Under various housing schemes in Real estate India, LTV can go as high as 90% of the property price within 30 lac. It is restricted to 70% on plot loans.
The procedure and key requirements such as
- eligibility criterion,
- equated monthly instalment (EMI) payment options,
Remain almost the same for home loans and plot loans.
Both home loan and plot loan have merits and demerits. It’s good to choose one after analyzing your needs and repayment capabilities.