Purchasing a new home or a plot of may not appear to be different to many people and both purchases would be referred to as buying a property in common parlance; however, there are differences which must be considered while looking for loans from leading builders in Chennai.

Home loans are available for properties that are expected to be constructed in future, under construction, or for ready properties, while land loans are available for purchasing a plot of land for building a house or for investment purpose. However, there are some similarities between the two types of loans too.

Home vs Land from leading builders in Chennai

Both land and home loans are offered by banks and Non-Banking Financial Companies (NBFC) to all Indian residents over the age of 21 years. Some banks also offer land loans to Non-Residents Indians (NRI) if the land is being bought to construct a house.

While a home loan is granted by a bank to purchase a house that is already constructed, under construction, or has been approved for construction in the recent future, for land loans one need to make sure that the plot of land that you want to purchase is a residential plot.

Also, while home loans are available on all approved properties irrespective of their location or size, land loans have some regulations.

These are:

# The land needs to be used for residential purpose in future

# It should be a non-agricultural and non-commercial property

# Situated within municipal/corporation limits

# Not in an industrial area nor a village

Lower LTV for Land Loans

Loan To Value (or LTV) is the quantum of loan you can get against a property. One can avail up to 80-85% funding in a home loan (90% in some cases) according to leading builders in Chennai. But for a land loan, the maximum LTV is capped at 70% of the plot value at best. So, if you are considering buying a plot for either personal use or as an investment, you would have to shell out a minimum of 30% of the funds from your pocket.

If the property is situated in smaller cities or towns, the maximum Loan To Value (LTV) ratio for land loans can be lower, at about 50%-60% of the total cost of the plot.

Interest Rate

Interest on loan charged by lenders on home and loan are similar. However, home loan interest rates are usually a few basis points (100 basis points=1%) cheaper than land loans according to leading builders in Chennai. There could be some minor differences as per the borrower’s profile. Also, both types of loans charge an additional processing fee.

Tenure of the Loan

The loan tenure for home loans is much longer in comparison to land loans for plots for sale in omr. Home loans are available for a maximum tenure of 30 years whereas land loans are available for a maximum tenure of 15 years.

Tax Benefits 

If you take a home loan, you can avail tax deductions on both, the principal repayment as well as payment of interest. On the other hand, the land loan is not eligible for any tax benefits. If, however, you construct a home on the plot of land, tax deductions are available, but only for the loan amount taken against construction. These benefits can be availed only after completion of the construction activity.

Overall, legal verification of documents for land loans is much more stringent than home loans. So, make sure to get legal help when going in for a land loan.