I am working in a multinational company. As part of my CTC, the company provides a facility of partial interest payment in case one avails a bank loan. I have a few queries: Do banks provide a loan for purchasing plots? If yes, will it be offered as a housing loan? Will I get income tax rebate under the home loan category?
— Sarvechan Shah Lenders are more selective when it comes to giving loans for plots. But these are available for a lower tenure as compared to a home loan and are sometimes more expensive (upto 2% higher) than normal home loans. Plot loans are available only when the plot is purchased directly from statutory authorities or from developers who are pre-approved by the concerned lender. Even the down payment requirement is normally higher at around 30% to 40% for such loans.
If you are planning to construct a house on that plot of land, you can take a composite loan from any bank to cover the cost of the plot as well as the construction, but you will have to commence the construction within a reasonable period which is between one to two years from the date of purchase of the plot.
A composite loan offers more benefits in terms of financing as well as tax sops. The loan financing in case of a composite loan goes up to 80% to 90% of the property value as compared to the plot loan’s 60% to 65%. Moreover, you can get tax benefits under section 80C for the principle repayment and section 24 for the interest paid on the composite housing loan, including the cost of the plot, only from the year in which construction is completed. Pure plot loans are not eligible for any tax benefits.