Generally, People are traditionally inclined towards buying a land either purely as an investment or for building a house. Many times, people are not eligible for home loan; in that case, you can look for plot loan to purchase a plot. People often get confused between a home loan and plot loans as home loans are available only for the property which is already constructed, or likely to go under construction soon. Hence, for funding the purchase of a plot, you will have to go for plot loan in India.
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Benefits of Plot Loans
Here are some of the benefits which have significantly contributed to increasing the popularity and demand for it:
The maximum amount a borrower can avail to purchase a plot majorly depends on income as well as the current value of the same land. Bank Plot Loan ranges in between 60-80% of the value of the plot. Let’s say if the total value of the property you selected is INR 10 lakh, you can avail a maximum loan of 8 lakh and have to contribute the remaining outstanding balance from your own source.
The tenure of plot loans is around 10-15 years, and the rate of interest is similar to a home loan which varies between lenders.
Low-Interest Rates: Most leading lenders offer plot loans at exceptionally low-interest rates which makes it exceedingly cost-effective for borrowers to acquire and repay the loan amount.
Low Processing Fee: Plot Loans usually attract a minimal processing fee, which is in between 0.35% to 0.50% of the loan amount.
Eligibility for Plot Loan
Plot loans are approved only if the borrower is purchasing land for non-agricultural purpose and the seller should have all the relevant documents in place, in addition to this, there are some other factors too which plays a crucial role in the approval process are:
Credit Score: For a swift approval of the plot loan application, a bank wants to be sure of the borrowers’ ability as well as willingness to repay the loan amount. Hence, a lender prefer a borrower with a credit score of 750+ ,and a poor credit score can lead to rejection of the application.
Age: The minimum age of the borrower should be 21 years while the maximum age at the time of loan completion is 70 years.
Nationality: A borrower who is willing to apply for plot loan in India should be an Indian citizen and must be able to furnish the proof of their nationality.
Loan Tenure: The maximum loan tenure for plot loans is 10 to 15 years.
Documents Required For Plot Loan in India
In order to get approval for plot loans, a borrower needs to submit the documentation as the requirements vary one lender to another, and are subject to change depending on the eligibility criteria laid down by different financial institutions.
A borrower needs to duly fill the application form, with a photograph, a proof of identity, residential proof, salary slip, bank statement for the last six months, Form 16 and a cheque for plot loan processing fee. In addition to all this, you may also be required to submit the documents pertaining to the ownership of the land, drawing or Layout of the Plot (duly approved by the town planning authority) and a No Encumbrance certificate for the plot.
The encumbrance certificate is a mandatory document to get approval for the plot loans as it is used during property transactions as an evidence of ownership. Banks need to be sure that when a borrower purchases a plot, it does not have any monetary or legal dues and the certificate ensures that there is complete ownership of the property without any liabilities.