A home is more than just a roof on the head. It’s a place you live your best memories in and a habitat you look up to every day to unwind after a tiring day at work. And this is what makes owning a home a dream for many. If you have decided to turn this dream into a reality, note that your housing finance needs will differ depending on what part of the country you are planning to buy your dream home in.
With expensive real estate in metros and megacities, high rises and building complexes are the only affordable option. However; in smaller cities and semi-urban areas, standalone houses and multi-storey bungalows are common.
Even though you are buying a property in both instances, there is a difference in how financing works for an apartment/home loan and a land/plot loan.
Here is a quick look at the differences between the two:
|Home Loan||Plot Loan|
|Purpose||To purchase an under construction or built-up home.||To purchase a plot of land for residential use.|
|Categories||Can be a loan for an apartment, bungalow or any residential unit.||Exclusively for a piece of land.|
|Loan to value ratio||Housing loans range from 70% – 95% of the property value.||Loans capped at 70% of the land value.|
|Fixed income eligibility||Usually between 40% to 55% of the your (borrower’s) income.||Does not go beyond 30% to 40% of the your (borrower’s) income.|
|Interest rate||Home loan interest rates start from 8.25% onward.||Plot loan interest rates start from 8.95% onward.|
|Loan tenure||Can go up to 30 years.||Capped at 15 years, except loans from some NBFCs available for 20 years.|
|Risk assessment of loan||Medium||High|
|Tax benefit||Tax benefits available on both repayment of principal and interest.||Tax benefit available only on loan for construction.|
|Availability of tax benefit||Every financial year until the loan is repaid.||Only after the entire construction is complete.|
Plot loans are considered to be riskier than standard home loans; therefore, the loan value tends to be marginally lower and interest a little higher. If you want to assess your budget accurately, you can use an EMI calculator for home loan to see which property fits your pocket better.
Whatever your investment needs are, Tata Capital has a loan for you. Whether you are looking to buy an apartment, plot of land, extend your home, get construction done or transfer the property, Tata Capital offers easy to secure loans at attractive interest rates.
The scale-up EMI option allows you to pay more as your income grows. A host of tools and home loan EMI calculator make it easy and transparent for you to plan for the future.
Although there are certain differences between the two, the procedure for application, documentation, criteria for plot loan and home loan eligibility are the same.
Understand your eligibility better with the home loan calculator and make your dream home a reality.