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.