Every patch of land has sentimental value in the owner’s heart. Buying an apartment does not grant you land rights. If you want to invest in land, then constructing your home on your patch of land is the best idea. With land rates on the rise, a land purchase loan can prove very useful in securing your land in a prime real estate location.
Owning a home is on everyone’s dream list. If you not happy with the typical layout offered by apartments, you can buy land and construct a home according to your requirements. Home Loans are for those looking to buy ready-to-move-in houses. Land Purchase Loans are a better option if you want to buy your own land and build your home. So, let us look at the various aspects of Land Purchase Loans and whether you can avail one.
What are Land Purchase Loans?
Land Purchase Loan is specifically designed to enable buying land on which a house can be constructed. The house that you construct can be used for both residential as well as investment purposes. The Indian housing finance market offers a large number of options for facilitating land purchase. Here are some of the most important aspects of Land Purchase Loans.
Unique Features of Land Purchase Loan
- Location and Purpose of the Land
Land Purchase Loans are exclusively for residential plots. These plots must be located within the designated residential zones. You cannot use these loans to buy land in your ancestral village. The loans can’t be used to buy agricultural land either.
- Short Tenure
Land Purchase Loans are for a maximum tenure of 15 years. So, you should consider the repayment you will need to make on the loan you take out.
- Lower LTV
Loan to Total Value or LTV is the amount you can borrow against the land. Land Purchase Loans offer a maximum LTV of 70%. So, the loan will cover a maximum 70% of the total land value. You must provide for the remaining 30% of the land price.
- No Tax Benefits
Land Purchase Loans do not come with tax deduction benefits.
Now that you know what Land Purchase Loans offer, let us look at the eligibility factors for availing a land purchase loan.
The following list will tell you if you are eligible for a Land Purchase Loan:
- Any residential land purchase can be financed with a Land Purchase Loan.
- Your repayment capacity decides the amount of the loan.
- To calculate your repayment capacity, consider factors like your monthly income, your total savings, outstanding liabilities (if any), and how many dependents do you support.
- In case, your spouse is earning, then the combined income will increase your loan eligibility.
Now, let’s look at the documents you will need to apply for a Land Purchase Loan
To get approval for your land purchase loan, you need to submit the following documents:
- Agreement of sale
- Allotment letter copies
- Approved layout and design of the land you wish to purchase
- Title deeds
- Title deed evidencing sale from the architect
Keep in mind if the land you’re buying is for resale, the previous claim documents need to be provided. If the asset has been converted, the payment receipt evidencing the charges incurred towards development and conversion also needs to be submitted.
A Few Points to Remember
WHAT YOU NEED TO KNOW ABOUT LAND PURCHASE LOANS
Land purchase is a serious financial consideration. So, when you decide to avail a land purchase loan, here are a few of the most important things about Land Purchase Loan that you need to know. These point will help borrower to get a better understanding of Land loan.
- The loan will only be made available to you if it is for residential or commercial purposes.
- The plot of land must be a stand-alone property or located in a gated community
- The rate of interest on a Land Purchase Loan is a bit higher than the Home Loan interest
- The loan tenure is usually for 15 years. In certain cases, you might be able to increase it to 20 years
- Ensure that there is no time limit before which you need to necessarily start construction on the land.
While buying land is a good investment and will give you the freedom to design your home, ensure that the land you wish to buy has a clear title. If you are looking to purchase your own land, then Land Purchase Loans are a very good option to consider for making your land and homeowner dreams come true!