Even though terms, prices and operations pertaining to land loans are much like compared to a mortgage, there are differences that are intrinsic the two.
Indian investors are typically inclined towards buying land either purely as a good investment and for building a property. Therefore, if you’re looking to purchase a plot, you might not qualify for a mortgage loan, but also for a land loan. Mortgage loans can be obtained limited to the house currently built, under construction or prone to undergo construction quickly. For funding the purchase of the plot that is vacant you are going to need to go after a land loan rather. Even though the terms, prices and operations associated with land loans are much like compared to a mortgage, there are many differences that are intrinsic the 2 as outlined below:
Property Location and Type: Unlike mortgage loans that are available on all properties regardless of their location or kind, you could get a land loan limited to a plot that is residential. Additionally, “the home should really be situated within municipal or organization limitations. Consequently, you can’t obtain money for purchasing an agricultural land, or even for purchasing a bit of land in a town. You could opt for a true mortgage, for constructing your home for the reason that little bit of land, following the purchase, ” says Adhil Shetty, founder & CEO of BankBazaar.com.
Lower LTV: Loan To Value (or LTV) could be the quantum of loan you will get against a residential property. As you can avail as much as 80-85% financing in a mortgage (90% in some instances), for the land loan, the utmost LTV is stipulated at 70% regarding the plot value at most useful. This effortlessly ensures that if you’re considering investing in a plot for either individual usage or as a good investment, you will have to shell away at least of 30% regarding the funds from your pocket.
No Tax Benefits: Unlike a housing loan, which can be qualified to receive income tax deduction for re payment of both interest plus the major amount, land loans try not to provide any such advantage. “You can avail taxation deductions only when you might be constructing a home into the plot. The deduction for the reason that instance does apply just for the mortgage quantity taken against construction, and just after conclusion regarding the construction activity, ” informs Shetty.
Land Loan and NRIs: Non Resident Indians are really a segment that is potential of purchasers in Asia. If you’re a Non Resident Indian and wanting to obtain a plot via a land loan, a thorough search is needed. Most of banks usually do not provide land loans to Non Resident Indians. Even when provided, they may come at a greater rate of interest.
Lower Tenure: the mortgage tenure for land loans is leaner when compared with housing loans. The utmost loan tenure readily available for land loans is 15 years while for a mortgage one could get as much as 30 years’ tenure. Nonetheless, some NBFCs like Dewan Housing Finance provide 20-year tenure for land loans.
Cap on optimum Loan Amount: Most banking institutions keep a maximum top limitation on land loans. “Indian Bank and Punjab nationwide Bank, as an example, stipulate optimum loan accessibility to Rs 1 crore and Rs 50 lakh correspondingly for sale of land. Consult your bank regarding the top limitation on loan quantity before you shortlist your loan provider, since this can significantly influence your money if you’re in search of a large solution loan for purchasing real-estate, ” claims Shetty.
Loans for Land buy and House Construction: Besides these, that you will start the house construction soon, there are some prerequisites if you are opting for a refinance option for your land purchase with a condition. Most banking institutions have precondition to start construction from the obtained block of land inside a period that is stipulated of. By way of example, “State Bank of Asia provides land loans only if the property owner guarantees construction of this home within two years through the date of allotment of SBI Realty Loan. For ICICI Bank, the construction must certanly be finished within couple of years through the date of availing very first disbursement associated with short term loans direct lenders loan, ” observes Shetty.
A land loan is normally addressed within the mortgage loan choices given by a bank and it is addressed when you look at the same manner as compared to a mortgage. The above-mentioned conditions are the sole exceptions into the remedy for a land loan. The procedure and demands like the bank’s homework procedure, EMI choices, paperwork, importance of co-applicants, interest rate, etc are identical both for mortgage loans along with land loans.