Land (for loan purposes) is vacant land or plot that can be used to construct a residence. Land loans are offered for the purpose of purchasing land or plot. You can take this loan to buy plots and create and built property or construction of your liking. Home loans, on the other hand, cannot be used to buy lands. They can only be used to buy an existent residential property, which may be an apartment, villa and any other. Here is a brief comparison between home loan and land loan that will help you choose the best option.
Tax benefits may be only available on home loans. As per Section 24, those choosing a home loan can get a rebate of up to rupees lakhs on the interest of the loan. According to Section 80 C, they will also get a rebate of up to rupees 1.5 lakhs on the principal amount of home loan every year.
If the joint owners are co-owners the property, they will also get the taxation benefits. No such benefit is available to those who take a loan for buying land or plot.
Tenure of Repayment
For repayment, both a home loan and the land loan may have a tenure of up to 20 years. When a higher amount is loaned, one can also get the repayment period greater than 20 years for home loans.
Loan-to-Value (LTV) Ratio
Loan-to-Value ratio is the ratio between the properties, price and the loan amount that is sanctioned to you by a Non-Banking Financial Company (NBFC) or Bank. For a land loan, you can get an LTV ratio of up to 75%. Therefore, if the price of a plot is rupees 1 Lakh, you will only get rupees 75,000 as loan and the rest of the money will have to be invested by you. LTV ratio for home loans may go up to 85% when you engage leading financial organization like Bajaj Finserv.
Both home loan and the land loan can get a loan amount of rupees 3.5 crores and are secured loans. A land loan cannot be taken for buying lands located in the agricultural, commercial, industrial or village areas, but are available for the municipal jurisdiction and corporation lands.