Plot Loans 2025 - Interest Rates & Features
What is Plot Loan?
Plot loans, also known as land loans, are a type of financing specifically designed for purchasing land for residential or commercial purposes. Often confused with home loans, plot loans differ in that they are used to finance the purchase of land before constructing a house on it.
Banks and Non-Banking Financial Corporations (NBFCs) offer land loans or plot purchase loans to individuals or businesses so they can buy a plot of land for residential or commercial use.
Plot Loan Interest Rates 2025
Banks | Interest Rate (p.a.) |
9.50% onwards | |
8.75% onwards | |
8.80% onwards | |
Shriram Housing Finance Plot Loan | Starting from 9.50% |
9.50% onwards | |
9.30% onwards | |
8.35% onwards | |
Contact the bank | |
IDFC First Bank Plot Loan | 8.85% onwards |
Bank of Baroda Plot Loan | Contact the bank |
9.00% onwards | |
Union Bank of India Plot Loan | Contact the bank |
Kotak Mahindra Bank Plot Loan | 8.75% onwards |
Features of Plot Loan
The following are the significant features of plot loan:
- Loan Tenure: The lenders usually provide a loan tenure for repayment for a duration ranging between 10 to 20 years. The lender considers the repayment capacity of an applicant while deciding the loan tenure and requires their applicants to maintain their monthly EMI contribution.
- Loan-to Value Ratio: LTV is the proportion of the plot value that can be financed by loan and up to 80% of the loan value is offered as LTV by the lenders. The credit risk assessment undertaken by the lender determines the final LTV ratio. The location of the plot, market value of the property, and the credit profile and repayment capacity of the borrower are considered while undertaking credit risk assessment.
- Tax Benefits: repayment of principal and interest components of the plot loan are not eligible for tax deductions. A home loan availed for constructing the residential property on the plot purchased through plot loan by the borrower is eligible for tax deductions.
- Balance Transfer Facility: Plot loans borrowers can avail themselves of home loan balance transfer facility on the existing plot loans. This way borrowers can transfer their outstanding loan amount to other lenders at an affordable rate. Availing balance transfer facility depends on credit risk assessment of the applicant performed by the new lender.
- Prepayment Charges and Processing Fees: The processing fees for plot loan ranges from 0.25% to 1.50% of the loan amount. Lenders are barred by the Reserve Bank of India (RBI) to charge prepayment fees on floating rates loans but free to charge on fixed rate loans.
What are Benefits of Taking a Plot Loan?
Some of the benefits of availing plot loans are listed below:
- Can be availed for purchase of residential land
- Attractive interest rates
- Affordable repayment tenures
- No pre-payment penalty
- Processing fee is low
- Minimal documentation
- Tax benefit under Section 24 and 80C of Income Tax Act
Plot Loan EMI Calculator
Using an EMI calculator will help you in knowing the amount which needs to be paid as EMI once you avail the plot loan. All you need to do is enter the loan amount, tenure in months, the interest rate and the processing fee and click on 'Calculate'.
What are the Eligibility Criteria for Plot Loan?
The eligibility criteria which need to be fulfilled in order to avail a plot loan are listed below:
- Must be a resident Indian
- Should be a salaried or self-employed applicant
- Should be between 18 and 65 years of age
- Compare: Plot Loan Eligibility
Note:
- NRIs can only apply for housing loan
- Loan applicants must have a credit rating of 750 or higher depending upon the lender to get their loans approved
What are the Documents Required to Apply for Plot loans?
Documents you need to provide when applying for a plot loan:
- Completed application form
- Your photo
- Proof of your age
- Proof of identity (like ID card or passport)
- Proof of residence (like utility bill or rent agreement)
- Recent salary slips
- Bank statements for the last 6 months
- Form 16 (income tax document)
- A cheque for the loan processing fee
Documents related to the land you want to buy:
- Original ownership papers of the land
- 'No Encumbrance' Certificate (shows the land has no legal dues)
- Approved layout or drawings of the plot from Town Planning Authority
- Revenue receipts and land records
- Tax receipts paid by the landowner
Get Checklist: Documents Required for Home Loan
How to Get Tax Exempted from Plot Loan?
Here are the following details regarding the tax exemptions for plot loans:
- Tax exemptions can be availed only if you construct house on the plot
- Once the construction is completed, then only you can avail yourself of the tax deductions on plot loan
- Tax deduction of Rs.1.50 lakh per annum which is on the principal repayment component can be availed as per Section 80C
- Under Section 24, tax benefit can be availed on the interest of the plot loan after completion of house construction and once you start residing in it
- Convert the plot loan into a regular home loan to become eligible for an annual deduction of Rs.2 lakh as per Section 24 of the Income Tax Act
- For pre-construction, you can also avail reduced interest rate and interest rate deduction
What are the Differences between Plot Loan and Home Loan?
The following is the list of differences between plot loan and home loan:
Home Loan | Plot Loan |
Loan provided for buying under constructed or constructed property | Provided for the purchase of plot for residential purposes |
Tax benefits offered on both interest payment and principal | Tax benefits offered to cover the construction cost only |
Loan repayment tenure is up to 30 years | Loan repayment tenure is up to 15 years |
LTV varies between 75% to 90% | LTV varies between 75% to 80% |
FAQs on Plot Loan
- What is the highest loan amount available through Land Loans?
The highest loan amounts provided by the lenders depend on the property value. It si generally 75% of the plot value but it may be up to 90% if the plot value is less than Rs.75 lakh.
- How to decide the bank from whom to avail plot loan?
Compare the interest rates offered by different banks and the loan amount being offered including the tenure based on your need. Check if there is any other offer being given. This can help you decide on a plot loan scheme suitable for you.
- How do you determine which bank is suitable to get a plot loan from?
To decide which bank is suitable for applying for a plot loan, compare the interest rates, loan amount, and tenure.
- How long will it take for the land loan to be approved?
The bank or the lender will take at least one week to go from verifying documents to loan approval.
- What factors determine the eligibility for a plot loan?
The factors that determine the eligibility for a plot loan are the location and size of the plot, income of the applicant, employment stability, credit risk, and purpose of buying the plot.
- What types of plots are eligible for plot loans?
The type of plots eligible for plot loans residential, commercial, or agricultural land on which lenders offer loan. But the eligibility criteria may vary depending on the lender.
- What is the land loan processing fee?
The processing fee on land loan depends on the income status of the individual whether the individual is salaried or self-employed. The processing fee also depends on the loan amount.
- Is it possible to convert a plot loan into a home loan?
Yes, you can convert a plot loan into a home loan. Plot loans are approved for borrowers for purchasing resident plot of land. The period is specified by the banks within which the construction of the residential property on the purchased land must be completed. The completion or occupancy certificate can be filed with the bank once the house is finished and then the plot loan can be converetd into home loan to avail tax deductions.
- Can I use the plot loan to purchase a flat?
No, you can only use a plot loan to buy items necessary in building a house. If you directly wish to buy a flat, you can apply for a home loan.
- Are plot loan and land loan same?
Yes, plot loan and land loan are same.
- Do NBFCs offer plot loans in India?
Yes, there are NBFCs that offer plot loans in India.
- Is it important to have a good credit score to avail plot loan in India?
Yes, it is important to maintain a good credit score to avail a plot loan in India.
- Are NRIs eligible for plot loans?
Yes, Non Resident Indians are eligible for plot loans from banks in India. However, the plot loan can only be used to buy a plot of land for residential use and cannot be used for any other purpose.
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