In general people may refer purchasing a new home or a land as buying a new property, but the loans taken for purchasing the two significantly differ with each other. Though in broad they may be referred as property loan and both may seem similar to many, there exist differences between the two- home loan and land loan.
|SR. NO.||HOME LOAN||LAND LOAN|
|1||Meaning||Loan taken to purchase residential resale or builder-under-construction or ready to move property or to be self constructed property.||Loan taken to purchase a piece of plot or land for residential purpose.|
|2||LTV-Loan To Value i.e. amount of loan that you get against the property.||90 % – Property Value up-to 30lakhs. 80% – Property Value up-to 75lakhs. 75% – Property Value above 75lakhs.||The maximum LTV is capped at 70% of the land value. (If the property is situated in smaller cities or towns, the maximum LTV ratio is 50%-60% of the total cost of the plot.|
|3||Loan Tenure||Maximum up-to 30years.||Maximum up-to 20 years.|
|4||Rate Of Interest||Relatively low in comparison to land loan – 7.90% – 8.65%||Relatively high than home loan – 8.50% -11.50%|
|5||Processing Fees||0.10% -0.30% of the home loan amount.||Upto 2%-4% of the land loan amount.|
|6||Foreclosure Charges||Nil – Floating Rate Of Interest. 2% – 4% – Fixed Rate Of Interest.||Nil – for individual borrower. 2% plus applicable taxes – for non-individual borrower.|
|7||Tax Benefits||Exemptions under section 80C for principal and section 24(b) for interest paid.||No tax benefits. The tax deduction is available only for the loan amount taken against the construction and only after completion of construction activity.|
Land Loan Restriction.
1) A land loan cannot be availed for buying an agricultural land or an industrial land.
i) The purchased piece of land has to be an NA land i.e. non-agricultural land.
ii) The purchased piece of land has to be a non-commercial property.
2) The land must be within the municipal or city limits and not in a village. A plot in grampanchayat is generally not considered for land loan. However there are few specific NBFCs who do grampanchayat loans.
3) The land needs to be used for residential purpose in future.
4) Lender Banks/NBFCS has a capping on maximum land loan amount. Banks like PNB has capping of 50lakhs while Indian Bank has 1Crore.
5) Lender Bank/NBFCs have preconditions towards the land loan to begin construction on the acquired plot of land within a stipulated period of time. Prominent banks like SBI and ICICI preconditions the construction on the plot o be completed within 2 years of land loan taken.
Conclusion: It is however seen that the availability of the plots or land is usually beyond the city limits mainly covered under grampanchayat. In a metropolitan city like Mumbai, plots for smaller investments by individual purchaser-as common man are rarely available. The plots so available are usually reserved and purchased by the developers/builders for constructing the residential/commercial apartments.
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