Things to Consider Before Getting a Plot Loan

Be it a farmhouse or a commercial structure, building a property adds to the cost of land purchase. Although 2020 has seen a whopping 30% downfall in plot rates across geographies, the general prices are still high. The good news is that if you wish to buy a vacant land now or a few years later, loans for plots are easily available. In fact, it is quite an economically viable option to save you from immediate payments. If you wish to get a plot loan, here are a few practical considerations to make.

Location of the Plot

The geographic location is an important parameter analysed by bank officials. To get your plot loans cleared without hiccups, keep the associated risks in mind. If the land is environmentally hazardous, unauthorized, or undergoing legal dispute, the chances are that the banks will refuse to offer loans for the same. Also, make sure the land is located in and around the city within municipal limits of pre-specified locations, which is the basic clearance requirement.

Bank Rates and Charges

Banks must be transparent about the EMI you have to pay and when. This way, it becomes easier to borrow the funds without exceeding your budget. Usually, borrowers also need to pay login fees, processing or administrative fees, and prepayment charges. Taxes, goods and service charges, and statutory levies are also applicable as per prevailing rates. Having a sound knowledge of the amounts can help plan your finances well.

Balance Transfer Facilities

Since times are unprecedented, you might have to reduce your EMI payments in the future. So, make sure to pick banks like ICICI HFC, which offer home loan balance transfer. The same facility is also extended for plot loans. They are most likely to offer competitive interest rates and adjust your EMI and tenure to fit your financial situation.

Tenure of Construction

Before picking a plot loan company, make sure the maximum tenure allowed is at least three years. You will have to provide a written undertaking ensuring that the construction completion will be done on time. Rest assured this will increase your chances of qualifying for the funds.

Tax Benefits

Home loans allow tax deductions for payment of principal amount and interest. However, plot loans do not offer any such benefit. You can only claim the exemption if you construct a property on it with another loan. Get in touch with the legal and technical team of your bank branch to learn the details for making an informed decision.

Analyse Your Financial Situation

Before preparing for a plot loan, scrutinize your savings, list of debts, and personal expenses. Try to understand if your current income would allow you to take a loan and pay monthly EMIs. Be honest with financial analysis and make practical choices.

In India, a plot of land or zameen” holds more importance than money. It is something that will last for a very long time, maybe across generations. Therefore, before financing your plot with a loan, understand the legal compliances, know the approximate construction commencement date, and explore loan options minutely.