The land purchase has been a valued investment in India for a long time. It is due to its practical and sentimental importance. Indian investors are particularly keen to buy plots in addition to ready-to-move-in residences.
An excellent option for financing the construction of a new home or office is a land loan. To determine the overall loan repayment amount, the most crucial factors to consider are the interest rate and length of the land loan interest rate repayment period. You can get a loan to buy land through direct allocation or a resale plot.
What are land loans, what are they used for, and how do they operate?
A parcel of land is necessary for anyone planning to build a home, a new workplace, or something agricultural. A land mortgage loan provides the required funding to cover costs whether you want to build a property now or later.
Features and advantages of a mortgage
We will discuss a mortgage’s several characteristics and practical advantages in this section:
- A land loan interest rate charged by reputable financial institutions at a competitive interest rate ensuring improved financial management.
- In a land loan, you’ll have the option of a 30-year repayment term. This will lower your monthly payments and make borrowing easier.
- One may qualify for a loan of up to 70-75% of their land value
- The application process for a mortgage is simple and convenient. Numerous lending organisations in India provide an online application process that speeds up the loan approval process and enables borrowers to get the loan money with the least amount of waiting.
- Furthermore, under Sections 80C, 80EE, 80EEA, and 24 of the Income Tax Act of 1961, one may choose to take advantage of tax advantages and exemptions for a mortgage. These tax advantages support improved financial management and assist both new and existing borrowers maximise their savings.
What conditions to meet before applying for a loan to buy land?
Before you apply for a loan to buy land, you must receive approval from the local authorities and have the legal documentation. Afterward, proceed to buy the property or plot best suited for non-agricultural uses only.
Check out other important things about the land loan –
Qualifications for the loan
Only if you intend to use the land for residential purposes and it is located inside the city/municipal limits is the land loan interest rate accessible. The land loan, however, is available for any type of property, regardless of location.
Regarding taxes
You receive tax advantages for the principal of a mortgage. And this benefit is applicable to your loan amount when you use it to build a house.
Reduced LTV
In the case of a home loan, you are often eligible for up to 85% to 90% of house value, but for a land loan, you can only get a maximum of 70% to 75% of the plot.
Loan Term: Home loans typically have a 20–30 year term. But a loan for land acquisition has a maximum term of only 15 years.
NRIs cannot obtain loans for land
In the case of housing loans, non-Resident Indians (NRIs) are regarded as a significant borrower category; however, the situation is different in the case of land acquisition loans. Getting a loan to buy land in India is exceedingly challenging for NRIs.
When it comes to approving land purchase loans to Native Americans, most banks and lenders have their policies or reservations.
Loans for land purchases fall on the higher end of the risk spectrum. Because developed assets have faster income-generating capabilities, lenders view them as much riskier than underdeveloped ones. You must have specific justifications and explanations for how you want to continue developing this property. This plays a crucial role in the loan approval procedure.
