We frequently make the erroneous assumption that the terms of a land loan and a home loan are identical, as both types of loans involve property. Home loans can be obtained for residences that are either already built, are now in the process of being built, or are scheduled to be built in the not-too-distant future. You might not be able to get a home loan, but if you want to buy land, whether it’s to build a house or just for investment purposes, you’ll need to get a land or SBI Plot Loan instead of a home loan because you’ll need the money for either purpose.
In spite of the fact that the application processes, terms and conditions, and tenure of home loans and land loans are comparable to one another, there are significant differences between the HDFC Plot Loan and home loan in terms of eligibility, restrictions, tax implications, kind of property, and other factors.
Characteristics and end usage of the concerned property-A home loan can be obtained from a bank or a non-bank financial company (NBFC) to purchase a house that is either already built, in the process of being built, or has been approved for construction in the near future. The characteristics of the property and the end use of the property are taken into consideration. Home loans are available for purchase on any property that meets the requirements, regardless of its size or location.
However, the situation is somewhat different when it comes to loans secured by land or plots of land. The property or part of land must be residential, non-agricultural, and non-commercial, as well as located within the bounds of the municipality or corporation, not in an industrial region, and not in a village for these types of permits to be issued for SBI Plot Loan.
Tenure and interest rate- The highest amount of time that a loan can be taken out for is often 15-20 years for a plot or land purchase, but the maximum amount of time that can be taken out for a home loan is typically 30 years. The few NBFCs that do make loans on land for up to 20 years are the exception to the rule. Additionally, because mortgage loans are viewed as having a lower level of risk than land loans, the interest rates of the latter are slightly lower.
Tax advantages –The repayments that a borrower makes on a land loan are not eligible to be deducted as an expense on the borrower’s income tax return. However, there are a few notable exceptions to this rule. After the building has been finished, rather than before, borrowers of an SBI Plot Loan are eligible for tax exemption on the interest they paid on the HDFC Plot Loan. However, the lender reserves the right to either rescind the loan entirely or increase the interest rate on the land loan if the construction on the land or plot does not begin within the allotted amount of time.
When it comes to mortgages, tax deductions can be obtained for both the interest that is paid and the principal that is repaid. In addition to this, you are eligible for the benefit if this is your very first time taking out a mortgage or if you are a co-signer on a loan with someone else. In this scenario, the interest that was accrued throughout the period of the project when it was still under construction can be collected five years after the project has been finished, subject to the total limit.
Processing fee – Both home loans and HDFC Plot loans have different processing fees associated with them. In most cases, the processing charge for home loans is lower than the fee for land loans.
Because of this, it is important to have a crystal clear understanding of the function of your property in order to select the appropriate kind of loan. This is because home loans and plot loans share some similarities in their features, and if you don’t pay attention to the distinctions between the two, your loan application may be turned down because your property does not meet the requirements for the loan in question. Home loans and land loans each have their own set of distinct qualities and advantages, both of which may only be accessed if the property in question and the reason for its acquisition are appropriate.
Avoid Getting It Confused With LAP
Now that you have a basic understanding of home loans and SBI Plot Loan, you must take care not to confuse the two with loans secured by property (LAP).
The majority of people who invest in real estate properties do so for one of three reasons: either to make money by selling the asset at a higher price, to park their extra money by purchasing the asset, or to live in the property themselves. Living on the property is the least common of the three reasons.
However, there are those of us who are not aware that possessing property that we can use as collateral for a loan against property can be of great assistance to us in times when we are in need of it and that this can be of great assistance to us in times when we are in need of it (LAP).
In its simplest terms, what is the LAP, and how does it work?
The majority of lending institutions will provide borrowers with the option to take out a loan secured by their real estate/property, which is also referred to as a LAP. In order to receive finances for financial necessities such as establishing a business or travelling internationally, as well as for personal requirements such as funding for education expenditures, medical charges, or wedding costs, one might take out this sort of loan by mortgaging their existing immovable property. For the purpose of securing a loan, residential property, as well as property that is used for commercial purposes, might be put up as collateral. The type of property can usually be residential, industrial, commercial, or an SBI Plot Loan and HDFC Plot Loan can be taken if it is a plot/land. Tenure usually ranges up to 15-20 years across different lenders.