Most of us tend to equate home loans with an apartment or an independent house. It’s not often that you find banks advertising plot loans. However, you can get loans for buying plots too!
There is a lot of obsession to buy plots in India, partly due to the emotional value attached to owning a piece of land. Obviously, the standard question that people would ask is what is a plot loan, in what form is it offered by the banks and what is the typical plot loan interest rate.
How Much of the Plot Value is Funded by the Bank?
That would vary from one bank to another; NBFCs may be willing to offer a higher LTV to the borrower. However, if we take the banks as a benchmark, then you can broadly see the following trends in plot value funding.
- If the value of the plot is around Rs. 75 lakhs, then the funding would be to the tune of 80% of the plot value in urban clusters while it would be around 70% in rural clusters of India.
- However, if the plot value is more than Rs. 75 lakhs, then the funding would be limited to 75% of the plot value in urban cluster and up to 70% in rural clusters of India. The maximum limit for plot is internally decided by each bank.
In the case of SBI, the plot loans are offered up to a maximum of Rs. 15 crore (70% property value and 80% of the construction value will be sanctioned) and for tenures up to 10 years, that too at interest rates as low as 9.50%.
SBI provides low processing fee of 0.35% of the loan amount + taxes, subject to a minimum of Rs. 2,000 and a maximum of Rs. 10,000.
No pre-payment penalty, no hidden charges. SBI also provides interest concessions for women applicants.
Most banks would insist that the age of the borrower at the completion of the loan cannot be more than 65-75 years of age.
While these plot loans are offered to salaried persons and also to self-employed persons, the condition is the person should be of Indian nationality.
What Decides My Eligibility for Plot Loans?
If you are all set to buy a plot of land and want to take a plot loan from a bank, then you should be familiar with the eligibility criteria. Also, since the cost of servicing the loan matters to you, you would also be looking at the plot loan interest rate.
In the case of SBI, the plot loans start from the rate of interest at 9.50% and can go higher depending on the financial soundness and CIBIL score of the borrower. Let us now look at some of the factors that will be considered to evaluate eligibility of the plot loan borrower.
- It is essential that you must be capable of entering into a contract. You must be between the ages of 21 and 65 and not be barred by law from entering into contracts due to being insolvent or of unsound mind.
- The plot loans are available to individuals who are salaried or self-employed, but a regular source of income is a must. That establishes the loan repayment capacity of the borrower of the plot loan.
- The person should be a resident of India. However, plot loans are also available to NRIs as long as they are citizens of India. The banks explicitly bar NRIs with dual passports from applying for plot loans.
- Finally, your credit score still matters. While the bank may not insist on 750 as the CIBIL score, a good and stable score is definitely an advantage.
How Do I Improve My Eligibility for Plot Loans?
If you are planning to go for a plot loan, then the first thing you must check is your eligibility to avail the plot loan from a bank or financial institution. You can take some the following simple steps to improve your loan eligibility. In that process, you can also reduce plot loan interest rate, which you have to pay on the loan.
- Go for a co-applicant with a good credit score. That substantially improves your chances of getting a plot loan.
- Give a full account of all incomes you earn to the bank including salary, variable commissions, interest, dividend, rental payments etc. The more, the merrier.
- See if you can offer any asset as security, this can raise your eligibility for plot loan substantially, even if you don’t check the other boxes for eligibility.
- Focus on the background of the place your work, its size, turnover to underline that you are in a stable job. That can substantially improve your chances of getting a plot loan.
Most banks will offer you a plot loan up to 70% of the plot value and at a single-digit rate of interest. The plot is offered as security against the loan. However, it must be noted that there are no tax benefits available to you from such plot loans and you should evaluate your effective cost accordingly.