Plots are considered golden means of investment as their value multiplies over time, because of the constantly ascending real-estate prices. A residential plot loan or land loan is one that enables you to buy a plot of land for the construction of a house. They differ from home loans by the fact that the latter involves loan agreements around the already constructed property, whereas the former relates to vacant land. Like other loans, a plot loan is lent on interest and is repaid to the lender in small portions by monthly instalments.
Why must you opt for a land loan?
Tax deductions are good plus points of land loans if you consider using the plot to construct a house on it. If you keep the plot vacant for a few years and decide to sell it once the real-estate rates have gone up, no tax relief will be granted, but under the Sections 80C and 24 of the Income Tax Act and the National Taxation Code respectively, you can avail tax deductions of up to Rs. 1,50,000-2,00,000 under different conditions. Land loan interest rates are lower than usual.
The minimum eligibility criteria to be fulfilled before applying for a plot loan are:
- The applicant must be a resident of India. For NRIs and PIOs, plot loans are given if they reside abroad due to employment reasons but have been in India for less than 182 days of the previous financial year.
- Agriculturists and small farmers are considered for plot loans, given to the irrigated/unirrigated land under them.
- The age of the applicant must be between 21 and 70.
- Applicants under the service sector must meet the income criteria and have a constant income source. Applicants under the business sector must have been in business for a certain number of years.
- Healthy credit score and good loan repayment history are a must.
Mandatory documents for getting a plot loan include:
- Duly filled and self-attested application with the required photographs
- Identity proof like Aadhar card, Voter ID, passport, or PAN card
- Address proof like passport, license, or Aadhar card
- Proof of educational qualification like the certificate of the most recent degree attained
- House-related paperwork like title document and approved plan
Salaried employees must submit:
- Form 16 for the preceding two years
- Salary slips of the previous three months
- Recent bank statements for salary credits
- The certification of employment
Self-employed applicants need to submit:
- Valid proof of the existence of the business and business profile
- Recent bank account statements for self and business
- Income Tax Return documents for the past three years for self and business
- Balance sheets and profit-loss records
Agriculturists and small farmers have to submit:
- The certificate that shows all the land under their hold
- Basic KYC documentation
Plot loan can be very beneficial as they are the gateways to building homes, seen as marks of financial stability for many in India. Once you go through the eligibility criteria and gather the documents required, you can go for a plot loan.