Finding your dream home is something that requires a lot of time and effort. It also often comes with a bunch of complexities and demands careful consideration and planning. And while building your home from scratch might seem exciting, it can also be quite overwhelming. But luckily, with several banks and financial institutions offering customised home loans on plot purchases, this endeavour has been made easy.

Today, we will help you navigate the intricacies of land transactions and secure the necessary funding for your plot purchase.

Key aspects to consider when applying for a home loan to purchase a plot

When applying for a home loan to purchase a plot, it is crucial to weigh several factors. Let us explore these aspects in detail.

Type of Land

If you wish to avail a home loan, be sure that you pick a plot that is exclusively intended for residential use. At the same time, you have the option of choosing between residential, agricultural, or industrial plots. For a home loan to be approved, you must get a plot for residential use only.

Location of The Plot

The approval of your home loan for plot purchase depends largely on the location of your plot. This is because there are certain areas that are ineligible for home loans as they may have a history of fraudulent land transactions.

Moreover, lenders may reject plot loan applications for plots in certain regions. To ensure that your plot does not lie in such a location, there are various lenders that provide a list of all the approved locations on their websites. So, before you make any decision, be sure to verify whether your desired location is on this list.

Interest Rate

Another important factor that you must consider is the interest rate for your home loan. A lower interest rate translates to lower repayment amounts, and a higher interest rate leads to higher repayment amounts.

Therefore, it is essential to assess the home loan interest rates offered by different lenders. You must compare them and opt for the most competitive one available. Some of the banks that offer lower interest rates on home loan plot purchases are- the State Bank of India (SBI), HDFC Limited, ICICI Bank, and LIC Housing Finance.

Loan Amount

The success of your plot acquisition depends largely on the loan amount sanctioned by lenders and your own contribution. Typically, plot loans, or home loans for plot purchases, cover 70%-80% of the land cost, although this percentage can vary among lenders. Your existing loans are also factored in when determining the loan amount. Lenders generally aim for the proposed EMI on plot purchase and other obligations to be within 50% of your net monthly income, guiding their decision on the final loan amount.

Understanding these factors will help you better understand the required down payment. Additionally, apart from the down payment, you will also need to budget for processing fees and registration fees.

Document Checklist - Home loan application for plot purchase

Title Deed
Encumbrance Certificate
NA Order
Original Land Deed (7/12 Document)
Property Tax Bills and Local Authority Approval Document
Conveyance Deed
E-Stamping in India
Rent Control Act and Transfer of Property Act
Occupancy Certificate
Lease VS Rent Agreement
Gift Deed
Partnership Deed

Frequently asked questions

1. What factors should be examined before making a plot purchase?

Ans: Before buying a plot, verify the title deed, obtain an encumbrance certificate, review original land deeds, and check other essential documents.

2. How do I choose a plot of land?

Ans: One should choose a plot of land by considering factors like location, accessibility, budget, future development prospects, and personal preferences.

Plot Loan and Home Loan for Plot Purchase

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