Plot Loan Differs from a Usual Home Loan Learn More

1. Hero Housing Finance Limited Plot Loan Differs from a Usual Home Loan: Learn More To buy a property or land, people opt for a loan not knowing the difference between a home loan and a plot loan. It is only obvious for a layman to believe that both are the same. However, differences should be considered before borrowing money. Regardless of the reason to buy land or property, you have to decide the type of loan to choose. Home Loan: A home loan is available to buy a property that is under construction or ready for possession. Plot Loan: A plot loan is a unique product planned to facilitate a loan for plot purchase. It is also called a land loan and often confused with a home loan. Benefits of Plot Loan Some common benefits of availing loan for plot purchase include: •Loan to buy a residential land •Attractive plot loan interest rate •Affordable repayment tenure •Low processing fee •No penalty for pre-payment •Minimal documentation •Tax benefits under sections 80C and 24 of the Income Tax Act Eligibility for Plot Loan •The applicant must be an Indian resident •The applicant is a salaried/self-employed individual •The applicant is aged between 18 to 60 years Documentation for Plot Loan Listed below are some of the important documents needed to apply for a loan to purchase plot land. However, note that these requirements are subjected to changes depending on the changing eligibility criteria of different financial institutions: •Duly filled plot loan application form •Photograph of the applicant •Identity proof •Residence proof •Recent salary slips (at least last 6 months) •Past 6 months bank statements •Form 16

2. In addition, applicants may be required to submit some of the following documents related to the plot: •Original documents related to the land ownership •No Encumbrance Certificate specific to the land •Drawings/layouts of the land, which is duly approved by the noted government office or Town Planning Authority •Land records •Revenue receipts •Tax payment receipts of the landowner Notable Difference Between Home Loan & Plot Loan #1: Type of Property & Location While home loans are available on many types of properties regardless of the type or location, one can only obtain a plot loan for the residential plot. In addition, the property must be located within the limits of a corporation or municipality. Consequently, one cannot obtain a land loan to purchase agricultural land or village land. However, one may obtain a home loan to construct a house on land after purchasing. #2: Lower Loan to Value (LTV) Loan to Value, or LTV, is the quantum of the amount of loan one can obtain against a specific property. In a home loan, one can obtain up to 85% of LTV, and even 90% in some cases. However, for the plot loan, the maximum amount of LTV stipulated is at 70% of the best value of the plot. This means, if one is considering buying a plot for personal use or the purpose of investment, one would have to invest 30% of own funds from the pocket. #3: No Tax Benefits Home loan has tax benefits for both the principal and the interest amount, but plot loans don’t offer the same benefits. If you want to build a home in that plot, you may avail some tax deductions. In such a vase, the deduction applies only to the amount of loan taken against the building, and after completion of the said building. #4: NRIs & Plot Loans Non-Resident Indians (NRIs) are considered the potential property buyer segment in India. However, if you are NRI and you seek to buy land through a loan, you must search extensively. Most of the banks do not accept land loan applications from NRIs. If offered, the interest rate may be higher. #5: Reduced Tenure The tenure of the land loan is much lower when compared to home loans. The loan tenure is usually up to a maximum of 15 years for plot loans, whereas it could go up to 30 years for home loans. #6: Maximum Loan Amount Capping The majority of the financial institutions keep the upper limit of plot loans to the maximum. Some of the prominent banks like PNB and Indian Bank, for instance, stipulate the availability of a maximum loan amount of Rs. 50 Lakh and Rs. 1Cr respectively for land purchase. Check with the financial institution on the loan upper limit and the amount before shortlisting a lender, as this could affect finances considerably.

3. #7: Loans to Buy Land & Construction In addition, if you want to refinance the purchase of land with the condition that construction shall begin soon, there may be prerequisites. Most financial institutions have certain preconditions to start construction on an acquired land within a specific period. Get hold of all the data before proceeding. Conclusion Although a plot loan is usually considered to be a home loan, it is not the same. Be sure about the process, requirements, the process of due diligence, EMI options, co-applicants, documentation, interest rate, etc., before applying. HHFL – Home Loan Feel Free to call - 1800-212-8800 https://www.herohousingfinance.com/ customer.care@hhfl.com