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How is a Land Loan Different from A home Loan in India?

How is a Land Loan Different from A home Loan in India

Since time immemorial, land has always been a prime avenue for investment. There are several reasons why you may want to consider investing in land plots in India. Wisdom Properties, the best real estate company in Chennai offers some tips and tricks in the below blog on investment in land plots and on some pointers regarding land loans. They are

1. Land as a hedge against inflation

Land is a tangible asset that tends to appreciate over time, especially in areas with high demand. As such, it can serve as a hedge against inflation, as the value of the land is likely to increase along with the cost of living.

2. Potential for appreciation

Land plots in India, especially in urban or semi-urban areas, tend to appreciate in value over time due to factors such as population growth and economic development. This means that you may be able to sell the land for a profit in the future.

3. Diversification of investment portfolio:

Investing in land plots can help diversify your investment portfolio, as it provides an alternative asset class to stocks, bonds, and other traditional investments.

4. Potential for passive income

If you purchase a plot of land and then lease it out, you may be able to generate passive income from the rental income.

5. Opportunity for development

If you have a vision for developing the land (e.g., building a house or commercial property), investing in a plot of land can provide an opportunity to bring your vision to fruition.

It's important to keep in mind that investing in land plots, like any investment, carries some level of risk. It's a good idea to carefully consider your financial goals and risk tolerance before making any investment decisions.  Often times, the way to purchase a property be it a plot of land, an apartment or the construction of an independent house is via loan. Now if you are going to go for a land loan, you need to remember some points.

In India, a land loan is a type of loan that is specifically designed to help individuals purchase plots of land. A home loan, on the other hand, is a loan that is used to finance the construction or purchase of a house. Here are some key differences between land loans and home loans in India:

1. Purpose of a land loan

As mentioned earlier, land loans are specifically designed to finance the purchase of a plot of land, while home loans are used to finance the construction or purchase of a house.

2. Collateral

Land loans generally require the plot of land being purchased as collateral for the loan, while home loans require the house being constructed or purchased as collateral.

3. Interest rates

 Land loans typically have higher interest rates compared to home loans, as the risk of default is higher due to the lack of a tangible asset (i.e., a house) to serve as collateral.

4. Tenure

Land loans generally have shorter tenures compared to home loans, as the construction or purchase of a house typically takes longer than the purchase of a plot of land.

5. Eligibility criteria

The eligibility criteria for land loans and home loans may also differ. For example, lenders may require a higher credit score and a higher down payment for a land loan compared to a home loan.

It's important to carefully consider the differences between land loans and home loans and choose the option that best meets your needs and financial circumstances. It's also a good idea to shop around and compare offers from multiple lenders to get the best deal.

Difference between a home loan and a Land loan

A home loan may only be used to purchase a residential property that has already been built or is currently being construction, whether it is a house or an apartment. A plot loan, also known as a land loan, can only be used to purchase a piece of land that will be used to build a house.

Features of a Land loan

Consider the following before you apply for a plot loan:

  • The parcel of property needs to be situated inside the corporate or municipal boundaries.
  • The loan can't be used to purchase land for agriculture.
  • The property shouldn't be situated near an industrial or a village area.
  • Up to 15 years may elapse throughout the loan's term.
  • Only loans used to build the property on the plot are eligible for a tax deduction, and that deduction may only be used after the building is complete.
  • You will receive a loan-to-value (LTV) ratio of up to 80%, which implies a loan for up to 70% of the cost of the property will be supplied.
  • You can obtain a plot loan to acquire a plot through direct allocation or to purchase a resale plot depending on the lender.

Features of a home loan

  • To purchase real estate anywhere in the world, you can obtain a house loan.
  • The tenure of the loan can go up to 30 years
  • Tax deduction can be availed
  • Depending on the lender, the loan-to-value (LTV) ratio might range from 60% to 90% of the property's cost.
  • If a husband and wife take out a combined house loan and each has their own source of income, they can each claim an income tax deduction for both the principle and interest portions of the loan.
  • You can obtain a home loan from an approved builder to purchase an apartment, bungalow, or row house depending on the lender.
  • You can also obtain a loan to purchase real estate from government development agencies, from cooperative housing societies or apartment owners' organisations that are already established, or from privately built residences.

Home Loan vs Plot Loan FAQs

1. Are loans for homes and land the same thing?

No, although having aspects in common, house loans and land loans are not the same. A land loan may only be used to purchase a plot of land where you want to build a home, but a home loan can be used to purchase a ready-to-move-in house, a residential property, or an under-construction property. You cannot use a land loan to buy a ready-to-move-in house or a building site, and you cannot use a home loan to buy a plot.

2. Does a home loan include land?

No, you cannot buy a plot or a piece of land with a house loan.

3. Can you change a plot loan into a mortgage loan?

No, it is not feasible to convert a plot loan into a mortgage. The borrower may submit an application for loans such as composite loans, which may be used to buy a plot of land and construct a house there within a certain time frame.

About Wisdom Properties

Wisdom Properties has some of the best properties in Chennai and suburbs. If individuals are looking for land for sale in Guduvanchery, DTCP Approved Plots sale in Oragadam, plots in Chennai or plots for sale in Maraimalai Nagar, then Wisdom Properties is the best real estate in company in Chennai to engage in.

Wisdom Properties delivers premium villas, farm land, and industrial land plots in Chennai and its outskirts. The prices are very attractive and affordable in price. They also have tie-ups with leading financial institutions and thus, it is easy to get loans and financial support from such institutions.

For more details, contact Wisdom Properties at +91- 93606-93606 or sales@wisdomproperties.com

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