Difference between Home Loan and Land Loan: Which one to Choose
In India, as Indians
are more inclined towards buying a piece of land for the purpose of investment
or for building house of their own choice however if we are thinking of getting it through loan
from banks or NBFCs (Non Banking financial companies), there is some difference
between home loan and land loan. The
major difference between home loan and land loan is tax benefits. There are
some others similarities and differences between home loan and land loan which
we will discuss in details.
Home loans are
offered for buying house either ready made or under construction, for
construction of house on piece of land, for reimbursement of payment already
made to buy home, for repairing or renovation of an existing house where as
land loan are offered for buying a piece of land for purpose of investment or
for purpose of constructing house there on.
Location of property: Difference between home loan and land loan: - home loans are offered for purpose mentioned above on all type of properties irrespective of locations of property where as land loans are offered at some specific locations only for inside municipal area or non commercial purpose. You cannot opt for funding for buying an agriculture land, it’s should be non agriculture.
Amount of Loan: Amount of loan is major difference between home loan and land loan, the factor deciding amount of loan is LTV ratio (Loan to value Ratio). LTV is the amount which you are about to get sanctioned against the value of your property. It’s is higher in case of home loan and lower in case of land loan approx. 50% -60%.
Tax benefits in home loan against land loan: if you are thinking of getting tax benefit, home loan is the answer for you. you get tax benefit on interest paid as well as on principal in case of home loan where as there is no tax benefit in case of land loan. If you are start construction on piece of land then you may be eligible for tax benefit after completion of construction.
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Land loan and NRIs:
NRIs are always keen to buy land for purpose of investment in India. They are
potential buyer of properties. But banks are not comfortable in landing to
them. Based on extensive search, some banks offer land loan to NRIs
Tenure of loan and
Rate of interest: Tenure is comparatively lower in case of land loan where as
home loan is offered for maximum period of 30 years. Interest rate is few basis
points higher in case of land loan and varies from bank to bank.
Home loan for
construction of house: Some bank like state Bank of India and ICICI bank offers
land loan with a pre condition of construction there on within stipulated time
frame. SBI offers in its product realty for purchase of land for construction
of house there on, owner here promises to start construction within 2 years of
availing loan.
Benefit of Pradhan Mantri Awas Yojna: you are more likely to listen about the scheme Pradhan Mantri Awas Yojna Housing for all, if you are a
potential home buyer. You are at right place for that. You will get benefit of
Pradhan Mantri Awas Yojna in case of home loan as per your eligibility and
entitlements where as there in no consideration of the scheme in case of land
loan.
Also Read:
A land loan is
often treated as part of the home loan options provided by a bank and is
treated in the same way as that of a home loan. The above-mentioned conditions
are the only exceptions in the treatment of a land loan. The process and
requirements such as the banks due diligence process, EMI options,
documentation, need for co-applicants, rate of interest, etc are the same for
both home loans as well as land loans.
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