Getting a loan for buying a plot you have been eyeing in your hometown or a place nearby is possible, but there are certain conditions you need to fulfil if you take such a loan.
What are the conditions?
You need to construct a house on the plot for which loan has been taken within a stipulated time period, which is generally in the range of two-three years.
Further, the minimum constructed area needs to be at least 25% of the total plot area. You will have to construct at least 25% within the time frame of two-three years even if you have acquired the plot through a plotting scheme of development authority. Without the loan, the authority gives around 12-15 years to construct the house.
What if you fail to construct a house?
If you aren’t able to construct a house within the given time frame, banks generally charge a penal interest of 2-3% over and above the contracted housing loan rates. Also, banks may revise the loan repayment period downward, which may increase the burden of equated monthly instalments (EMIs) on you. If you fail to repay the reworked EMIs, the bank can forfeit the plot for which you took the loan.
Authority plot: Usually, the authority will reclaim the plot only after 12-15 years, the time allotted for construction without a loan.
Features of the loan
The maximum amount you can avail for buying a plot depends on your income as well as on the value of the land. Banks provide loans ranging between 50-80% of the value of the plot. So, if the value of the property is Rs 10 lakh, you can avail maximum loan of Rs 8 lakh and have to contribute the balance from your own sources.
The tenor of such loans is around 10-15 years and the rate of interest charged is the same as home loan rates, which varies between lenders.
There is no income-tax benefit on a loan taken for a plot.
What can you do?
You can take another housing loan for constructing a house on the same plot. In such cases, both the loans would run concurrently. But remember that having one loan already, your repaying capacity would come down and, therefore, the loan you get for constructing a house may be limited.