What is a Home Loan?
A home loan is a financial loan provided by banks or financial institutions to help individuals buy, construct, or renovate a residential property.
Common Purposes:
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Buying a ready-to-move-in house or apartment
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Buying an under-construction property
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Constructing a house on your own land
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Renovating or extending an existing home.
What is a Land Loan (Plot Loan)?
A land loan is used to purchase a residential plot of land with the intention of building a house in the future. It is not meant for buying agricultural or commercial land and usually comes with stricter terms and conditions.
Common Uses:
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Buying a residential plot within municipal or development authority limits
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Planning to build a home within 2–5 years
Detailed Comparison: Home Loan vs Land Loan?
| Aspect | Home Loan | Land Loan (Plot Loan) |
|---|---|---|
| Purpose | Purchase, construction, or renovation of a house or flat | Purchase of a residential plot only |
| Property Type | Built house, apartment, or under-construction property | Only residential plot (no agricultural/commercial use) |
| Eligibility | Salaried, self-employed, or professional with stable income | Similar eligibility but banks may apply stricter criteria |
| Loan-to-Value (LTV) Ratio | Up to 80%–90% of property value | Usually 70%–75% of plot value |
| Interest Rates | Lower, due to lower risk for banks | Higher, as land is riskier for lenders |
| Repayment Tenure | Up to 30 years | Usually up to 15 years |
| Disbursement Type | Full disbursement (for ready home) or in stages (if under construction) | Lump sum disbursement only at time of purchase |
| Tax Benefits (India) | Eligible for tax deductions: | Not eligible for tax deductions unless home construction starts |
| - Section 80C (Principal) | ||
| - Section 24(b) (Interest) | ||
| Construction Requirement | Not mandatory unless constructing a new home | Usually must start construction within 2–5 years |
| Location Restrictions | Can be in rural, semi-urban, or urban areas (based on property approval) | Must be within urban or municipal limits |
| Availability | Offered by all banks and financial institutions | Offered by limited banks or NBFCs |
| Documentation | Standard property documents, ID/income proof, builder approval, etc. | Requires clear title, approved land use, municipal approvals, etc. |
Key Points to Remember
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A home loan is more flexible, widely available, and provides tax benefits. It’s ideal if you are buying or building a house immediately.
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A land loan is for purchasing a residential plot only. You may be required to build a house within a few years.
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You can get a composite loan (land + construction) if you plan to buy a plot and construct a house soon.
Final Recommendation
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Choose a Home Loan if:
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You want to buy or build a home
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You want tax benefits
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You need longer repayment terms and lower interest
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Choose a Land Loan if:
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You want to buy a plot to build your home later
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You plan to start construction within 2–5 years
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You don’t need immediate tax savings
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