The benefits of Plot Loans and Construction Loans

Borrowers who want to buy land and construct a house on it can avail plot loan and construction loans to design the house the way they want.

Buying property does not only mean buying a readymade house in a residential complex. You can also purchase land and construct and design a house on it. If you do not have the necessary funds to buy land, you can seek financial support from a lender. Lenders, such as IDFC FIRST Bank, offer a particular type of loan fit for buying land and constructing a house on it. This article will explore it in detail.

What is a plot loan?

A plot loan is a unique banking instrument that makes it easy to buy land. It is also known as a land loan but is different from a home loan. The contrast between a plot loan and a home loan is that a plot loan can only be availed to buy land for constructing a house. Most lenders in India provide plot and land loans to qualified candidates. You can use them to purchase land in any area of your choosing.

Benefits of a plot loan

Some of the benefits of a plot loan include:

• You can use it to buy a piece of residential property
• Appealing interest rates
• Affordable repayment terms
• There is no penalty for paying in advance.
• Minimal processing fees
• Minimal documentation
• Tax benefits under Sections 24 and 80C of the Income Tax Act.

What is a construction loan?

Individuals who own land and need financial assistance to build a home can apply for a home construction loan. Home construction loans have a payback period of up to 30 years and allow you to cover the costs of many construction expenses. Banks and financial organisations provide loans with low-interest rates to help you build a house or residential property.

Benefits of a construction loan

Construction loans come with many benefits, such as:

• Appealing interest rates
• Up to 30-year repayment terms
• A high loan-to-value ratio of close to 100% of the construction budget or 90% of the property's value, whichever one is lower, is applicable.
• Tax benefits
• Balance transfer facility
• Top-up service

Is it possible to get a plot and construction loan together?

Buying land and constructing a house on it can be expensive. Lenders, hence, allow borrowers to avail a plot and construction loan together as well. Borrowers must provide the lender with the details of the land they want to purchase and details of the construction of the property. If the lender feels borrowers have the right repayment appetite, both loans are sanctioned together.

Property and construction loans are helpful products. Your end goal will decide which one suits you better. IDFC FIRST Bank, among other lenders, can help you avail both types of loans. IDFC FIRST Bank can also provide competitive interest rates and easy repayment options, decreasing your shoulders' financial burden. IDFC FIRST Bank's banking app is a bonus, as it offers the support you need while repaying your loan.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.