Get the Tata Capital App to apply for Loans & manage your account. Download Now

Blogs

SUPPORT

Menu  
 
Apply Now
Apply Now

Tata Capital > Blog > Loan for Home > Difference Between a Home Loan and a Plot Loan

Loan for Home

Difference Between a Home Loan and a Plot Loan

Difference Between a Home Loan and a Plot Loan

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 LoanPlot Loan
PurposeTo purchase an under construction or built-up home.To purchase a plot of land for residential use.
CategoriesCan be a loan for an apartment, bungalow or any residential unit.Exclusively for a piece of land.
Loan to value ratioHousing loans range from 70% – 95% of the property value.Loans capped at 70% of the land value.
Fixed income eligibilityUsually between 40% to 55% of the your (borrower’s) income.Does not go beyond 30% to 40% of the your (borrower’s) income.
Interest rateHome loan interest rates start from 8.25% onward.Plot loan interest rates start from 8.95% onward.
Loan tenureCan go up to 30 years.Capped at 15 years, except loans from some NBFCs available for 20 years.
Risk assessment of loanMediumHigh
Tax benefitTax benefits available on both repayment of principal and interest.Tax benefit available only on loan for construction.
Availability of tax benefitEvery financial year until the loan is repaid.Only after the entire construction is complete.

Plot loans are considered to be riskier than standard home loan; 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, required documents, 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.

How to Choose Between a Plot Loan and Home Loan

Choosing between a plot loan and a home loan depends primarily on your immediate housing goal. While both help you invest in property, they serve very different purposes and come with distinct financial implications.

Here’s what you should keep in mind before deciding:

1. Purpose of purchase: A plot loan is suitable if you want to buy land for future construction or long-term holding. A home loan works better if you want a ready home or plan to start construction immediately.

2. Loan tenure and affordability: Plot loans usually come with shorter tenures and higher EMIs, while home loans offer longer repayment periods, making monthly outgo more manageable.

3. Loan amount eligibility: You generally receive a lower loan amount for land compared to a built property due to higher risk perception.

4. Tax benefits: Home loans offer immediate tax deductions, while plot loans provide tax benefits only after construction is completed.

5. Location restrictions: Plot loans are typically approved only for residential plots within municipal or development authority limits.

Plot Loan vs Home Loan: Eligibility Comparison

While both plot loans and home loans assess your income, age, and credit profile, lenders apply stricter norms to plot loans. This is mainly because undeveloped land carries higher risk compared to a completed residential property.

FeaturePlot LoanHome Loan
Loan-to-Value (LTV)60%-75% of land value80%-90% of property value
Maximum tenureUp to 15 years (some lenders up to 20)Up to 30 years
Interest rateUsually 0.5%-1% higherLower, market-linked rates
Tax benefitsOnly after constructionAvailable immediately
Property eligibilityResidential plots within municipal limitsReady or under-construction homes
NRI eligibilityOften restrictedWidely available

Plot Loan vs Home Loan: Documentary Requirements

The basic personal and financial documents required for both loans are similar. However, property-related documentation differs significantly because lenders assess risk differently for land and built properties.

Documents required for plot loan

To approve a plot loan, lenders verify that the land is legally eligible for residential construction. You are typically required to submit:

– Sale deed or title deed showing clear ownership

– Non-encumbrance certificate confirming no legal dues or disputes

– Approved layout or zoning plan from the local authority

– Proof that the plot falls within municipal or development authority limits

– Non-agricultural (NA) conversion certificate, where applicable

Documents required for home loan

For a home loan, lenders assess the status and legality of the residential structure. Commonly required documents include:

– Sale deed (for resale property) or builder-buyer agreement (for new projects)

– Approved building plan sanctioned by the local authority

– Occupancy Certificate (OC) or Completion Certificate (CC) for newly constructed homes

– Possession letter from the builder, if applicable

– Property tax receipts or utility bills as proof of possession

Apply for Housing Loan

Say Hello to Your New Home with Our Easy Home Loans!

Apply now
Popular Searches
PMAY Calculator Home Loan for Government Employee Home Loan for Self Employed Home Loan for Women Home Loan Balance Transfer with Top Up Area Calculator Stamp Duty Calculator Home Loan Top Up Approved Housing Projects in India 12 Lakh Home Loan 15 Lakh Home Loan 25 Lakh Home Loan 30 Lakh Home Loan 35 Lakh Home Loan 40 Lakh Home Loan 45 Lakh Home Loan 60 Lakh Home Loan 65 Lakh Home Loan 70 Lakh Home Loan 75 Lakh Home Loan 80 Lakh Home Loan 85 Lakh Home Loan 90 Lakh Home Loan 1.5 Crore Home Loan 2 Crore Home Loan 2.5 Crore Home Loan 3 Crore Home Loan 4 Crore Home Loan
More About Loans
home loan Home Extension Loan Affordable Housing Loan Pradhan Mantri Awas Yojana Home Construction Loan Home Loan Balance Transfer Documents Required for Home Loan Home Loan Interest Rates Home Loan EMI Calculator Home Loan Eligibility 10 Lakh Home Loan 50 Lakh Home Loan 30 Lakh Home Loan 40 Lakh Home Loan

FAQs

Can I use a plot loan to construct a home later?

A plot loan only finances land purchase. You need a separate construction loan later or can opt for a composite loan covering both land purchase and future construction.

What is the maximum tenure for a plot loan in India?

The maximum tenure for a plot loan is typically up to 15 years, though some lenders may extend it to 20 years in select cases.

Are plot loans eligible for tax benefits?

A plot loan does not offer tax benefits on purchase. Tax deductions apply only after construction is completed and the loan is treated as a home loan.

How does land valuation affect plot loan approval?

Land valuation determines the loan amount since lenders fund only 60%-75% of the plot value. Approval depends on location, legal clarity, and municipal limits.

Which is better: plot loan or home loan for investment?

A home loan is usually better for investment due to lower interest rates, immediate tax benefits, and rental income potential, while plot loans suit long-term holding strategies.

Disclaimer

Most Viewed Blogs

Trending Blogs

Calculator

Personal Loan EMI Calculator

Home Loan EMI Calculator

Business Loan EMI Calculator

Used Car Loan EMI Calculator

Two Wheeler Loan EMI Calculator

Loan Against Securities Calculator

Loan Against Property Calculator
More Tools
Our Subsidiaries
Our Private Equity Funds

Useful Links and Resources

Policies, Codes & Other Documents

Tata Capital Solutions & Services

Uh oh, something went wrong

Please try again later.

Most Important Terms & Conditions - Home Loans

Download in your preferred language

Download