Buying land is often the first step toward building your dream home, but many people wonder if they can take a home loan for just the plot. The good news is: yes, it’s possible — but there are specific rules, eligibility criteria, and loan types to be aware of.

This guide explains everything in simple terms so you can make an informed decision.

1. Types of Loans Available for Buying Land

1.1 Land Loan / Plot Loan

• A land loan is specifically for purchasing a plot of land.

• It is different from a home loan because it only covers the cost of land, not construction.

• Usually offered by banks and NBFCs.

Key Features:

• Loan amount: 50–70% of land cost (may vary by bank).

• Interest rate: Slightly higher than regular home loan (8–12% approx.).

• Tenure: Shorter than home loan — typically 5–15 years.

1.2 Home Loan for Land + Construction

• Some banks allow a combined loan: part for land purchase, part for construction.

• Commonly called “Land + Construction Loan” or “Construction Finance.”

• Allows you to buy the plot and immediately fund your home construction.

Advantages:

• Single EMI for both land and construction.

• Bank disburses construction amount in stages as construction progresses.

1.3 Home Loan with Land as Collateral

• If you already own land, banks may approve a home loan using the land as security.

• Useful for upgrading to a bigger home or financing construction.

2. Eligibility Criteria for Land Loan

Banks usually consider these factors before approving a land loan:

Tip: Most banks don’t finance agricultural land unless converted to residential use.

3. Loan-to-Value Ratio (LTV)

• For land purchase, banks generally approve 50–70% of the land cost.

• Example: If land costs ₹50 lakh, your loan may be ₹25–35 lakh.

• Home loan for construction usually allows 80–90% funding on construction cost.

Lower LTV for land is because land alone is considered riskier collateral than a constructed property.

4. Interest Rate and EMI

• Land loans often carry slightly higher interest rates than regular home loans.

• EMI depends on:

  • Loan amount

  • Interest rate

  • Tenure

Tip: Compare banks and NBFCs — some may offer floating rates that are cheaper over time.

5. Documents Required for Land Loan

• Identity proof: Aadhar, PAN, Passport, Voter ID

• Address proof: Utility bills, Aadhaar

• Income proof: Salary slips, IT returns, bank statements

• Land documents: Sale deed, Patta/Chitta, FMB sketch, Encumbrance certificate

• Approved layout plan (DTCP / CMDA)

Make sure your plot is legally approved, otherwise the loan may get rejected.

6. Things to Keep in Mind

1. Approval Process Is Stricter: Banks scrutinize land ownership and approvals carefully.

2. Down Payment Is Higher: Expect to pay 30–50% upfront.

3. Loan Tenure Is Shorter: Unlike home loans of 20–30 years, land loans often max out at 10–15 years.

4. No Immediate Tax Benefit: Interest on land loan alone is not tax-deductible. Tax benefits apply only after construction is completed.

5. Avoid Unapproved or Agricultural Plots: Banks will not finance them.

7. Tips to Get Your Land Loan Approved Faster

• Choose DTCP / CMDA approved plots.

• Maintain a good credit score (750+ ideal).

• Provide complete documentation upfront.

• Keep stable income and employment records ready.

• Consider a co-applicant to increase loan eligibility.

8. Combining Land Loan and Home Loan

• Many buyers opt for a combined approach:

  • Loan for land (50–70% of cost)

  • Home loan for construction (up to 80–90% of construction cost)

• This ensures single EMI tracking and reduces financial stress.

At Prakash Constructions, we assist clients in choosing the right loan type, preparing all documents, and liaising with banks — ensuring your land purchase and construction financing are hassle-free.