Aug 29, 2023

Plot Loan vs Home Loan: Know More About the Differences

by Godrej Properties Limited



When buying property, people often use the terms "home loan" and "plot loan" interchangeably, assuming they both serve the same purpose. However, there are significant differences between the two, and understanding plot loans Vs home loan is crucial when seeking financing for property purchase. 

Plot Loan vs Home Loan/Land Loan vs Home Loan

1. Purpose of the Loan 

The primary difference between a plot loan and a home loan lies in their purpose. A home loan is secured to acquire properties under construction, ready for possession, or to get constructed in the future. A home loan for land purchase is for financing the purchase of a completed residential property. At the same time, a plot loan is specifically for buying a piece of land for building a house or for investment purposes.

2. Nature of the Property 

A home loan covers residential properties, including apartments, houses, and villas. It facilitates buying a property for immediate occupancy. In contrast, a plot loan solely focuses on purchasing a plot without existing construction.

3. Loan Disbursement 

In a home loan, the lender directly pays the seller or builder of the property, and the loan amount gets disbursed in one go. On the other hand, in a plot loan, the lender may disburse the loan amount in several installments based on the progress of the land purchase or construction, if any.

4. Interest Rates and Tenure Interest Rates 

Plot loans tend to have higher interest rates compared to home loans. Home loans typically offer longer tenures, making it more convenient for borrowers to repay the loan over an extended period.

5. Tax Benefits 

Home loans offer tax benefits on the principal amount and the rate of interest paid as per Section 80C and Section 24(b) of the Income Tax Act. However, plot loans offer different tax benefits, as they are considered land investments and not for immediate residential purposes.

Conclusion: Which Loan is Right for You

A plot loan is designed for buying land and it funds the purchase of empty plots for construction in the future. A home loan helps purchase built or planned properties, enabling physical possession of a residence immediately or in the future. Understanding "home loan vs land loan" is crucial and is an essential financial tool for property buyers, as they cater to different needs. 

Each loan type comes with unique terms, interest rates, and benefits, so it's crucial to understand the difference between a plot loan vs home loan and assess your requirements and financial capabilities before choosing the one that aligns with your property goals.


Q: Can we take a home loan on a plot? 

A: No, a home loan caters explicitly to financing completed residential properties. If you intend to buy a plot of land, you should apply for a plot loan.

Q: Can I take a home loan for a land purchase? 

A: No, a home loan cannot get used solely for land purchase. If you wish to buy land without immediate construction plans, you should opt for a plot loan instead.

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