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Tata Capital > Blog > Construction Loan > Loan for Plot Purchase and Home Construction

Construction Loan

Loan for Plot Purchase and Home Construction

Loan for Plot Purchase and Home Construction

Do you dream about owning a house tailored to your preferences? If so, building a house might be something to consider. Constructing your own house gives you the freedom to fully customise it to meet your specific needs and match your aesthetics.

However, financing could be a factor that keeps your dream of building and owning a house from coming true. With plot plus construction loans, this obstacle is no longer insurmountable. These specialised loans are designed to support both land acquisition and construction costs, bridging the financial gap for aspiring homeowners.

Dive into this article to understand how a loan for plot purchase and construction works, its advantages, eligibility criteria, and the documents required.

What is a plot plus construction loan?

A plot plus construction loan is a financial solution for those dreaming of homeownership. It is a dual-purpose versatile loan that covers purchasing a residential property and funding the subsequent home building. The coverage of this loan extends beyond direct plot purchase to resale acquisitions and balance transfer.

Also, read – Loan for Buying a Plot: Everything You Need to Know

Key Features & Benefits of Plot Plus Construction Loan

A Plot Plus Construction Loan helps streamline the journey from land purchase to home construction. Some key features and benefits include:

  • Single financing solution: Provided by a Lender, this loan combines plot purchase and construction funding into one account, reducing documentation and making approvals and repayments easier to manage.
  • Stage wise disbursement structure: Funds are released in line with construction progress, ensuring better cash flow control and responsible utilisation throughout the building phase.
  • Lower overall borrowing cost: Compared to separate loans, interest rates and repayment terms are often more cost effective, helping borrowers manage long term finances efficiently.
  • Defined construction timeline: Borrowers must start construction within a set period, minimising delays and exposure to rising costs.
  • End to end home planning: For buyers seeking a home loan for plot purchase and construction, a plot and construction loan offers clarity, flexibility and smoother execution from start to finish.

Also, read – Plot Purchase Loan: Eligibility, Interest Rates & Guidelines

Advantages of a plot plus construction loan

#1. Versatile and comprehensive coverage

The plot plus construction loans cover all aspects of your financial needs related to building your house. It includes both the purchase of the plot and construction costs. Additionally, its versatility caters to all scenarios, whether purchasing a plot directly, through resale, or upgrading an existing house.

#2. Competitive interest rates and flexible repayment terms

The plot plus construction loan interest rate is competitive, reducing your financial burden. The plot plus construction loan terms and conditions allow for flexible repayment options. The repayment term can extend up to 30 years, meaning you can choose a tenure that aligns with your financial capabilities.

#3. Nationwide access

There is no geographic restriction to limit your access to the loan for plot purchase and construction. The loan gives you the flexibility to purchase land anywhere in India. With this loan, you can build your home in your dream location.

#4. Easy eligibility and quick approvals

You can avail yourself of a plot plus purchase loan by meeting simple eligibility criteria. These loans also come with quick processing and approvals, giving you immediate access to funds.

#5. Tax and financial incentives

The loan for plot purchase and construction comes with financial perks. You can avail of deductions under the Income Tax Act 1961. You also have the advantage of facilities such as balance transfers, which ease your EMI burden to help you navigate your finances.

Also, read – Plot Loan Tax Benefits in India | Eligibility & How to Avail

Eligibility criteria for loan for plot purchase and home construction

– You must be between 24 and 65 years of age to be eligible for a loan for plot purchase.

– You must have a minimum salary of Rs. 30000 monthly and two years of work experience.

– Self-employed applicants must have a three-year business history, and NRIs need three years of work experience.

Also, read – Difference Between a Home Loan and a Plot Loan

Documents required for loan for plot purchase and home construction

– Age, Photo, and Address Proof: Passport, PAN Card, Driver’s License, Aadhar Card, utility bills or property tax documents.

– Income Proof: Bank statements, salary slips, and yearly increment documents.

– Existing Loan Details

Also, read – Composite Loan: Meaning, Benefits & Eligibility

Plot and Home Construction Loan Fees and Other Charges

Knowing the fees and charges for a home loan for plot purchase and construction helps you plan your finances efficiently. Here are the key costs associated with a plot and construction loan:

  • Pre-Closure and Part Payment Charges: Applicable if you choose to repay the loan early or make part payments, depending on the loan type and interest rate structure.
  • Penal Charges: Fees applied for late payments or bounced instalments if the repayment schedule is not followed.
  • NACH or Auto-Debit Failure Charges: Levied if auto-debit instructions fail, including costs for reprocessing NACH mandates.
  • Accrued Interest and Regulatory Charges: Interest on delayed payments and any statutory filing charges as per regulatory requirements.
  • Document and Statement Fees: Charges for duplicate statements, repayment schedules, or copies of property documents.

Also, read – How to Claim Stamp Duty Exemption on Property

Tips for Choosing the Best Loan Provider

Selecting the right lender can make your journey of purchasing land and constructing a home smoother and more efficient. 

Here are some tips to help you choose wisely.

  • Interest Rates and Charges: Compare interest rates offered by different lenders and understand all associated fees. A competitive rate reduces your overall repayment burden.
  • Loan Flexibility: Check if the lender offers flexible repayment options and tenure suitable for your financial situation.
  • Eligibility and Documentation: Ensure you meet the eligibility criteria and understand the documentation required for a home loan for plot purchase and construction. Simplified processes save time and effort.
  • Reputation and Service: Research the lender’s reputation and customer service. Prompt support and transparent dealings enhance your borrowing experience.
  • Pre-Approval Facility: Some lenders provide pre-approval for plot purchase and construction loan, helping you plan your budget and negotiate better with sellers.

Conclusion

The journey from dream to reality when building your dream home needs a solid financial backbone. A comprehensive plot plus construction loan can fund every stage of your journey.

Tata Capital offers plot purchase and construction loans that blend competitive interest rates, flexible repayment tenures, and flexible coverage. Our experts provide stellar service and support to help you find the perfect home loan that meets your requirements.

For more information and to start your home loan application process, visit the Tata Capital website today!

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FAQs

How does a plot plus construction loan work?

A plot construction loan is a dual-purpose loan that finances the purchase of a plot and the construction of a house on it.

Can we get the loan on a plot and build a house?

 

Yes, you can use the loan to build a house. You can also use it for renovation and expansion purposes.

What is the maximum tenure of a plot loan?

The maximum tenure of a plot plus construction loan is 30 years. You can select a tenure that meets your financial needs.

What documents are required for a plot and construction loans?

 

The documents required for a plot and construction loan include proof of identity and address, proof of income (e.g., salary slips or bank statements), plot-related documents, an approved building plan, and no-objection certificates. Lenders may also request a detailed construction cost estimate to process the application smoothly.

How is the loan amount for plot and construction loans calculated?

 

The plot purchase plus construction loan amount is generally based on the cost of the plot and the estimated construction expenses. Lenders assess your repayment capacity, property valuation, and the proposed construction plan. Typically, a percentage of the total cost is sanctioned as the loan amount, ensuring it aligns with both your budget and eligibility.

Are interest rates for plot and construction loans higher than regular home loans?

 

Yes, plot and construction loans usually have slightly higher interest rates compared to regular home loans. This is because these loans involve additional risk for lenders due to the construction process and the phased disbursal. Borrowers can often negotiate better rates by maintaining a strong credit history and providing complete documentation.

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