Buying a new house or a plot of land may appear to be similar to many
people, and both acquisitions would be described to as purchasing property in
common jargon; however, there are differences which must be contemplated while
looking for loans.
Regardless of whether you apply for a housing loan or a land loan, the process carried out by the lenders for administering both types of loans is basically the same. Moreover, the EMI alternatives offered by lenders and policies for co-applicants are also similar for both home and land loans.
Differences
Property location and purpose
You can apply for home loan for ready homes, properties under construction or to be self-constructed. Whereas, land loans are availed for the acquisition of a plot of land, provided the land will be used exclusively for residential purposes. A home loan cannot be taken for properties recognized as agricultural or industrial. Land loans also can be taken for residential land only. The land site should be within municipal or city limits and not in a rural area. Similar to a home loan, a land loan cannot, for acquiring agricultural or industrial land.
Loan tenure and EMI play a major role in any loan application. A home loan has a higher time duration as compared to a land loan. The tenure for a housing loan can be up to 30 years in some cases while for a land loan the maximum tenure could be up to 15 years, although these vary between various banks and financial institutions.
Both home loan and land loan have their advantages, but the best approach would be to select one after analyzing your requirements and repayment abilities.
Home loan is available for houses that are projected to be built
in future, under construction, or for ready homes, while land loans are
available for acquiring a plot of land for building a house or for investment reasons.
However, there are some things similar as well as different between the two
types of loans too.
Regardless of whether you apply for a housing loan or a land loan, the process carried out by the lenders for administering both types of loans is basically the same. Moreover, the EMI alternatives offered by lenders and policies for co-applicants are also similar for both home and land loans.
Differences
Property location and purpose
You can apply for home loan for ready homes, properties under construction or to be self-constructed. Whereas, land loans are availed for the acquisition of a plot of land, provided the land will be used exclusively for residential purposes. A home loan cannot be taken for properties recognized as agricultural or industrial. Land loans also can be taken for residential land only. The land site should be within municipal or city limits and not in a rural area. Similar to a home loan, a land loan cannot, for acquiring agricultural or industrial land.
Loan to value
Loan to Value (LTV) is the loan
amount you can avail against a property. Since housing loan is linked with the acquisition
of residential collateral, LTV is higher than for land loan, under reasonably
priced housing, LTV can go as high as 90 per cent for loans below 30 lakhs,
whereas it is restricted to 70 per cent on land loans.
Tax Benefits
Availing home loans in India
can get tax deductions on both, the principal repayment as well as payment of
interest. Whereas, land loan is not eligible for any tax subsidies. If,
however, you build a home on the plot of land, tax benefits are available, but
only on the loan amount taken against construction. These advantages can be
availed only after construction project is completed.
Tenure of loan
Loan tenure and EMI play a major role in any loan application. A home loan has a higher time duration as compared to a land loan. The tenure for a housing loan can be up to 30 years in some cases while for a land loan the maximum tenure could be up to 15 years, although these vary between various banks and financial institutions.
|
|
Home Loans
|
Land
Loans
|
|
Property
type
|
Buying of constructed
or under construction
house.
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Acquisition of a plot of
land only for residential
purposes.
|
|
Tax
benefits
|
Applicable for both principal and interest payable.
|
Tax subsidies applicable -
only covering construction
cost.
|
|
Tenure
|
Up to 30 years
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Up to 15 years
|
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Loan to
value (LTV)
|
From 75 to 90 per cent
|
From 75 to 80 per cent
|
Both home loan and land loan have their advantages, but the best approach would be to select one after analyzing your requirements and repayment abilities.
