Tips to select the right loan for property- SBI Plot Loan vs A Housing loan

Because both forms of loans include property, we frequently assume incorrectly that a plot loan and a housing loan are the same. Home loans are available for properties that are already constructed, are now being built, or are expected to be constructed in the not too distant future. Even though you might not be able to receive a home loan, you will need to get a land or SBI Plot Loan if you want to buy land because you’ll most probably need the money for either building a house on it or just investing in it.

The eligibility requirements, constraints, tax ramifications, kind of property, and other considerations for the HDFC Plot Loan and home loan are very different, despite the fact that the application procedures, terms and conditions, and tenure of home loans and land loans are equivalent to one another.

Specifications and intended use of the subject property-

To buy a home that is either already built, is being built, or has been approved for building in the near future, one can get a home loan from a bank or non-bank financial institution (NBFC). It is taken into account both the property’s qualities and intended use. Any property that satisfies the standards is eligible for a home loan, regardless of size or location.

However, when it comes to loans backed by real estate or individual parcels of land, the situation is quite different. For these kinds of permits to be provided for SBI Plot Loan, the property or portion of land must be residential, non-agricultural, and non-commercial, as well as situated inside the boundaries of the municipality or corporation, not in an industrial district, and not in a hamlet.

Tenure and interest rate. For the purchase of a plot of land, the maximum loan term is frequently between 15 and 20 years, but the maximum loan term for a residence is typically 30 years. The few NBFCs that do offer up to 20-year loans on land are the exception. Mortgage loans also have slightly lower interest rates than land loans since they are thought to have a lower amount of risk.

Tax benefits –

A borrower’s payments on a land loan are ineligible to be written off as an expense on their income tax return. There are a few major exceptions to this generalisation, though. Borrowers of an SBI Plot Loan are qualified for a tax exemption on the interest that they repaid on the HDFC Plot Loan when the building has been completed, not before. However, if building on the land or plot does not start within the specified time, the lender maintains the right to either completely withdraw the loan or raise the interest rate on the land loan.

Tax deductions are available for mortgage-related expenses such as interest payments and principal repayments. Additionally, if this is your first mortgage loan or if you co-signed the loan with someone else, you are qualified for the bonus. In this case, the interest that was accumulated throughout the project’s construction phase may be repaid five years after the project’s completion, subject to the sum allowed.

Processing charge –

The processing fees for HDFC Plot Loan and home loans are distinct from one another. The processing fee for residential loans is typically less than the amount for land loans.

As a result, choosing the right type of loan requires having a clear grasp of how your property serves its purpose. This is due to the fact that plot loans and home loans have some aspects in common, but if you don’t pay attention to the differences between the two, your loan application may be denied since your property doesn’t satisfy the criteria for the loan in issue. Both home loans and land loans offer unique characteristics and benefits, but only if the property in question and the justification for the purchase are adequate.

Avoid confusing it with LAP

You should be careful not to mistake home loans and SBI Plot Loan with loans secured by property now that you have a solid understanding of both (LAP).

Most people who invest in real estate do so for one of three reasons: to live in the property personally, to park their extra cash by buying the asset, or to generate money by selling the asset at a higher price. The least frequent of the three justifications is residing on the property.

However, there are those of us who are unaware that having assets we may use as collateral for a loan against property can be extremely helpful to us in times of need and that this can be extremely helpful to us in times of need (LAP).

What is the LAP, and how does it operate, in its most basic form?

The majority of financial organisations give borrowers the choice to obtain an LAP, often known as a loan secured by plot or other property. One could take out this kind of loan by mortgaging their current immovable property in order to get money for financial needs like starting a business or travelling abroad, as well as for personal wants like funding for college costs, medical expenses, or wedding costs. Property that is used for both residential and business purposes may be used as collateral to get a loan. The sort of property can often be residential, commercial, industrial, or if it’s a plot or land, you can apply for an SBI Plot Loan or HDFC Plot Loan. Across different lenders, the tenure typically runs between 15 and 20 years.

How to Get a Plot Loan Tax Exempted?

Only if a house is built on the plot can you take advantage of tax benefits on your plot loan. Only after the construction is finished are tax deductions possible. You may deduct the principal component of repayment up to a Rs. 1.50 lakh annually under Section 80C of the Income Tax Act.

After the house’s construction is complete and you begin living there, Section 24 of the loan’s terms allows you to receive tax benefits on the component of interest of the loan. You are entitled to a 2 lakh rupee annual deduction under Section 24 of India’s Income Tax Act. To obtain that, though, you must convert the plot loan into a standard home loan.

You must also take advantage of interest rate reductions and lower interest rates applicable for pre-construction in addition to this.


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