How to Buy Plot on Loan in Chennai: Eligibility &Interest Rate

October 30th, 2024

How to Buy Plot on Loan in Chennai: Eligibility & Interest Rate

You can buy plot on loan in Chennai by understanding the eligibility, interest rates, benefits, and essential steps for prospective buyers.

Buying a plot of land in Chennai can be a rewarding investment, especially with the city’s rapid development and growing infrastructure. However, navigating the financial aspects can be daunting, particularly when it comes to securing a plot loan in Chennai.

It is important to understand the eligibility criteria and prevailing interest rates, so you can take an informed decision. This blog describes the essential steps and considerations involved in acquiring a plot loan in Chennai, empowering you to turn your property aspirations into reality.

Table of Contents

What is a Plot Loan?

A plot loan in Chennai is a financial product designed for individuals or families looking to purchase a piece of land. This type of loan is particularly popular among those interested in securing their own plot for residential or investment purposes. A plot loan in Chennai is an effective way for both salaried and self-employed individuals.

Difference Between Plot Loan and Home Loan

Understanding the differences between plot loan and a home loan is important for property buyers. It can help you plan your real estate investment, whether you are looking to buy plot on loan in Chennai or secure financing for a new home.

Feature Plot Loan Home Loan
Purpose To purchase a plot of land for residential construction To buy a house that is already constructed or is under construction
Location Restrictions Must be within municipal or corporation limits; cannot be agricultural land or located in designated industrial area Can be used for properties in any location of choice
Loan Tenure Up to 15 years Up to 30 years
Tax Deductions Available after construction is completed on the plot Available on both principal and interest components
Loan-to-Value Ratio (LTV) Usually up to 80% of the plot’s value Usually up to 90% of the property cost
Joint Loan Benefits Usually not applicable Both partners can claim tax deductions separately
Property Types Only for land purchase For apartments, villas, row houses, and properties from approved builders
Loan Options Can include direct allotment or resale plots; may offer bundled land + construction loans Can only be used for completed or under-construction properties

6 Benefits of Buying a Plot on Loan in Chennai

You can buy plot on loan in Chennai specifically for acquiring residential land. Plot loans are tailored to facilitate this process, enabling you to secure land intended for future construction.

  1. Attractive Interest Rates

    Lenders often offer competitive interest rates for plot loan in Chennai, making them an appealing choice for those looking to invest in land. Lower interest rates can lead to significant savings over the loan tenure, enhancing affordability.

  2. Affordable Repayment Tenure

    Plot loan in Chennai typically comes with flexible repayment tenures, often extending up to 15 years. This flexibility allows you to choose a repayment schedule that fits your financial planning, making it easier to manage monthly payments.

  3. No Pre-payment Penalty

    One of the advantages of taking a plot loan in Chennai is the absence of pre-payment penalties. Borrowers can pay off their loans early without incurring extra charges, providing financial freedom and opportunities to save on interest costs.

  4. Low Processing Fee

    The processing fees for plot loan in Chennai are generally lower compared to other types of loans, making the overall cost of borrowing more manageable. This affordability encourages more buyers to consider how to buy plot on loan in Chennai.

  5. Minimal Documentation

    Plot loan in Chennai usually requires minimal documentation, streamlining the application process. This ease of access can allow you to complete your application quickly and efficiently, reducing the time & efforts needed to secure financing.

  6. Tax Benefit under Sections 24 and 80C of Income Tax Act

    When you buy plot on loan in Chennai, you can enjoy tax benefits under Sections 24 and 80C of the Income Tax Act. Section 24 allows for deductions on interest paid on loans, while Section 80C provides deductions on principal repayment, thereby reducing your overall tax liability and making the plot loan interest rate even more advantageous. However, please note that the benefit is available only after construction of your house is complete.

Step-by-Step Process to Buy Plot on Loan in Chennai

Purchasing a plot on loan can be a strategic investment, especially in a growing market like Chennai. Here’s a comprehensive guide to help you navigate the process effectively.

  • Step 1: Decide the Location and Budget

    Choosing the right location in Chennai is important. Consider factors such as proximity to workplaces, schools, colleges, hospitals, public transport hubs, malls, metro lines, multiplexes, and major transport routes. Next, assess your financial situation – including savings, income, expenses – and project them over the next 10 years. This disciplined planning will guide your decision-making process, when you buy plot on loan in Chennai.

  • Step 2: Research and Choose a Lender

    Explore various banks and Non-Banking Financial Companies (NBFCs) that offer plot loan in Chennai. Compare their plot loan interest rates, terms, and conditions. Look for factors such as the lender’s reputation, customer service quality, and any hidden fees.

  • Step 3: Check Loan Eligibility

    Before applying for a loan, it is essential to understand the general plot loan eligibility criteria. You can assess your eligibility online using calculators available on lender websites or by consulting them directly.

  • Step 4: Submit the Loan Application to the Bank or NBFC

    Prepare the necessary documents, which usually include KYC (Know Your Customer) documents, income proof, and property documents. The application process typically takes a few days, depending on the lender. A pre-determined fee should be paid, which differs with every bank. For instance, the charges in ICICI bank are as follows:

    Processing Charges:
    A non-refundable fee of up to 2% of the loan amount is required upon application submission. It covers appraisal costs and is payable via cheque, demand draft, or other accepted modes.
    Administrative Charges: A one-time fee of 0.25% of the facility amount or ₹5000 (whichever is lower) is payable at disbursement for property valuation and legal verification.
    Commitment Charges: For overdraft facilities, a 0.5% charge applies to deficits if the 30% minimum utilisation is not met quarterly (not applicable to salaried customers).

  • Step 5: Verification and Loan Approval

    This involves validating your documents and conducting property valuation and legal checks. Once all checks are complete, and if everything is in order, your loan will be approved.

  • Step 6: Disbursement of Loan

    Upon approval, the lender will disburse the loan amount. Understand the difference between partial and full disbursement. Some lenders may disburse the amount in phases, especially if you plan to construct on the plot later.

Eligibility Criteria for Plot Loan in Chennai

When considering a plot loan in Chennai, it is important to understand the eligibility criteria, which can vary across different banks. While many banks set the minimum age at 18 years, some begin eligibility at 21 or even 23 years. The following table summarises the age criteria for salaried and self-employed applicants:

Bank Salaried Applicants Self-Employed Applicants
Maximum Age Limit
SBI 18 years and above 18 years and above
70 years at loan maturity
HDFC Bank 21 years and above 21 years and above
65 years at loan maturity
ICICI Bank 23 years and above 23 years and above
65 years at loan maturity

Standard Eligibility Criteria for Plot Loans

  • Residency Requirement:

    The applicant must be a resident of India. However, Non-Resident Indians (NRI) and Persons of Indian Origin (PIO) can also apply for a plot loan if they are abroad for employment or other reasons and have been in India for less than 182 days in the preceding financial year.

  • Age Limit:

    Most lenders require applicants to be between 21 and 70 years old. The maximum age at maturity can differ based on whether the applicant is salaried or self-employed.

  • Income Criteria:

    For salaried individuals, meeting specific income criteria is essential, along with a stable source of income. Self-employed applicants should demonstrate a consistent business presence.

  • Creditworthiness:

    Good credit score and clean repayment history are key to securing a plot loan in Chennai. Lenders assess these factors to determine your eligibility and the associated plot loan interest rate.

    Read More: Residential vs Commercial Plots in Chennai – Best Investment Options

Documents Required for Buying a Plot on Loan

  • When applying for a plot loan in Chennai, you will need to provide the following essential documents.Completed application form
    Recent passport-sized photographs
    Proof of age
    Proof of address
    Proof of identification
    Salary slips of last 3 months
    Bank account statement of the last 6 months
    Form 16 of the last 3 years
    Cheque leaf for the loan processing fee
  • Additional Land Documents: You may also need to submit specific documents related to the land, including: Original ownership documents for the plotNo Encumbrance Certificate for the property
    Approved layouts or drawings of the plot from the Chennai Town Planning Authority
    Revenue receipts
    Relevant land records
    Tax receipts showing payments made by the original landowner

Interest Rates for Plot Loan in Chennai

Banks and Non-Banking Financial Corporations (NBFCs) provide land loans to individuals and businesses looking to acquire land for residential or commercial purposes.

Banks Interest Rate (p.a.)
SBI 9.4% – 9.85%
HDFC 9.4% – 9.95%
Federal Bank starts from 8.8%
Shriram Housing Finance starts from 9.5%
PNB Housing starts from 9.5%
Karnataka Bank 9.3% – 11.45%
Bank of Maharashtra 8.35% – 10.9%
LIC Housing Finance starts from 8.7%
IDFC First Bank starts from 8.85%
Bank of Baroda starts from 8.4%
ICICI Bank starts from 8.9%
Union Bank of India starts from 8.35%
Kotak Mahindra Bank starts from 8.75%

6 Additional Charges Involved in Buying a Plot on Loan

When you buy plot on loan in Chennai, it is essential to be aware of the various charges involved in the process. These charges can significantly affect the total financial outlay of your plot loan.

  1. Taxes (GST and Stamp Duty)

This tax applies to the supply of goods and services in India. When you secure a plot loan in Chennai, GST may be applicable on processing fees or other service charges.

  1. Stamp Duty and Registration Charges

This tax is paid on the legal document transferring property ownership. The rate varies by state, and is based on the property’s market value or sale price.

  1. Valuation Report Charges

Lenders require this report to assess the market value of the plot. Prepared by a certified valuer, it ensures the loan amount is proportional to the property’s worth.

  1. CERSAI Report Charges

Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) registers property-related transactions. A CERSAI report verifies that the property is free from legal encumbrances, with charges varying by service provider.

  1. Title Investigation Report (TIR) Charges

This report checks the legal ownership of the property, ensuring there are no disputes regarding the title. Charges for TIR may vary based on the complexity of the title search.

  1. Other Service Charges

Lenders may impose various service charges for loan processing, documentation, and administrative tasks during the process of buying a plot on loan in Chennai.

Tips for First-time Plot Buyers in Chennai

Keeping these tips in mind, you can confidently navigate the process to buy plot on loan in Chennai, ensuring a sound investment.

  1. Be Financially Prepared

    Before you buy plot on loan in Chennai, ensure your finances are organised. Sellers expect you to be ready, and this avoids cash issues after finalising the plot.

  2. Assess the Surroundings

    Evaluate the environment around the plot. Check for factors like traffic noise, proximity to water bodies, and nearby industrial zones. A desirable location enhances your investment.

  3. Understand Zoning Laws

    Familiarise yourself with zoning restrictions. If you plan to build a home, avoid non-residential zones to comply with the regulations.

  4. Consult on Regulations

    Besides zoning, check other applicable laws for the plot. Hire a legal expert specialising in real estate, to avoid complications in the future.

  5. Proximity to Social Infrastructure

    Look for plots near essential facilities like schools, colleges, universities, hospitals, malls, shopping areas, multiplexes, public transport hubs. Proximity to modern, well-known facilities increases convenience and property value.

  6. Connectivity Matters

    Ensure the plot is easily accessible via roads, railways, and airports. Good connectivity enhances its value.

  7. Utilities Availability

    Investigate if the location has essential utilities like electricity, water, and internet access.

  8. Verify Legal History

    Before finalising your purchase, check the plot’s legal background for any disputes or pending tax dues. This step is crucial for a hassle-free future.

  9. Check Measurements

    Hire a surveyor to confirm land measurements and check for potential encroachments, to avoid any surprises down the line.

  10. Choose Reputable Sellers

    Opt for established projects with reputable developer. While smaller projects may seem more cost-effective, they often carry higher risks. A reliable builder adds security to your investment.

    Read More: What to Check when Buying Gated Community Plots for Sale in Chennai

Pros and Cons of Buying a Plot on Loan

If you plan to buy a plot on loan in Chennai, weigh these pros and cons carefully to take an informed decision that aligns with your financial goals and aspirations.

  • Pros:Affordable Financing: A plot loan in Chennai allows you to finance your land purchase without draining your savings
    Flexible Repayment Options: Many lenders offer flexible repayment plans, allowing you to choose a tenure that suits your financial situation
    Potential for Appreciation: Investing in a plot can yield significant returns over time, especially in developing areas of Chennai where property values are on the rise
    Customisation: Owning a plot gives you the freedom to build your dream home or develop the land according to your preferences
    Tax Benefits: You may qualify for tax deductions on interest paid, further enhancing the affordability of the loan.
  • Cons:Down Payment Requirements: Many lenders require a substantial down payment, which may be a barrier for some buyers
    Delayed Returns: Unlike ready properties that generate rental income, vacant plots do not offer immediate financial returns until development occurs

Conclusion

Embarking on the journey to buy plot on loan in Chennai can be captivating and transformative. Understanding the intricacies of a plot loan in Chennai, including eligibility and interest rates, allows you to navigate this labyrinth effectively. As you delve into factors like location and facilities, you can make informed choices that go beyond simple investments.

FAQs

1. Can I get a loan to purchase a plot?

Yes, you can get a loan to purchase a plot, commonly known as a plot loan in Chennai, which many banks and financial institutions provide.

2. Can I get a 90% plot loan?

Generally, lenders provide up to 70-80% of the plot's value as a loan, so a 90% plot loan is uncommon due to risk management guidelines.

3. What is the maximum plot loan amount?

The maximum plot loan amount is up to 70-80% of the plot's market value, and it varies based on the borrower's income, credit profile, and lender policies.

4. Can I get a plot loan without construction?

Yes, you can get a plot loan without immediate construction, though some banks may require you to start constructing within 2 to 5 years.

5. Does SBI give a loan for a plot?

Yes, SBI (State Bank of India) gives a loan for a plot under specific terms and conditions, including location restrictions.

6. Can I get a land loan without a job?

It is challenging to get a land loan without a job or a stable income source, as lenders require proof of income to assess repayment capability.

7. Does plot loan save tax?

Plot loan does not save tax until construction is complete; tax benefits can be claimed under sections 80C and 24(b) once a house is built on the plot.

8. Is plot loan the same as a home loan?

No, a plot loan is different from a home loan, as a plot loan is used to purchase land, while a home loan is for buying or constructing a residential property.

9. Which loan is best for buying land?

A plot or land loan is the best option for buying land, as it is specifically designed for that purpose and offered by various banks and NBFCs.

10. Is it OK to buy a plot on loan?

Yes, it is OK to buy a plot on loan, as it allows you to secure land in a desirable area without arranging for sufficient funds upfront.

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