Although buying a new house or a piece of land may not seem like very different things to many people—both transactions would be referred to as buying property in common parlance—some variations must be taken into account when applying for financing.

Only if you intend to use the land for residential purposes and it is located inside the city/municipal limits are loans for land purchase accessible. The home loan, however, is available for any type of property, regardless of location.

Let’s know about how home loans and land loans are similar and dissimilar.

The similarities

The lenders’ due diligence procedure for processing both types of loans is generally the same, regardless of whether you apply for a loan for land purchase or a home loan.

Additionally, both home and land loans have comparable co-applicant rules and EMI alternatives given by lenders.

The distinctions

  • Location and purpose of the property

Home loans are available for both ready-to-move-in and under-construction as well as self-built residences. On the other hand, if the land will only be utilized for residential reasons, land loans may be obtained for the purchase of a plot of land.

  • The loan’s duration

Compared to the loan for land purchase, the borrowing term for mortgages is significantly longer. Land loans can be obtained for a maximum of 15 years, whereas home loans can be obtained for a maximum of 30 years.

  • LTV (Loan to Value Ratio) / LCR

LTV/LCR ratio measures how much of a loan you can obtain about a property’s worth or cost. Home loans often have an LTV/LCR ratio of 75–90%, meaning that the borrower can typically obtain a loan for 75–90% of the cost or value of the property, depending on the loan size. Depending on the loan size, the maximum LTV for a land loan is limited to 75 to 80% of the property value. Therefore, you would need to put down at least 20% of the plot’s value if you were thinking of purchasing a piece of land for your own use or as an investment.

  • Tax benefits

Tax deductions are available for both principal and interest payments made when taking out a mortgage. Land loans, however, are not entitled to any tax advantages. Tax deductions are however only possible for the amount of loan borrowed against construction if you build a house on the property. After the construction project is finished, these benefits might be utilized.

  • Loans availability

In the case of housing loans, non-Resident Indians (NRIs) are regarded as a significant borrower category; however, the situation is different in the case of land acquisition loans. For NRIs, getting a loan to buy land in India is exceedingly challenging. Whenever it comes to granting land purchase loans to Native Americans, the majority of banks and lenders have their policies or reservations.

Loans for land purchases fall on the higher end of the risk spectrum. Because developed assets have faster income-generating capabilities, lenders view them as being much riskier than underdeveloped ones. You must have a specific set of justifications and explanations for how you want to continue developing this property.

What conditions must be met before applying for a loan for land purchase?

  1. You are required to buy the property or plot of your choice that is best suited for non-agricultural uses only.
  2. Before you apply for a loan to buy a home, the land should have received approval from the local authorities, and you must have the necessary legal documentation.

There are intrinsic distinctions between the two loans, even though the rates and terms of the loan for land purchase are comparable to those of the home loan.

Compared to the loan for land purchase, the borrowing term for mortgages is significantly longer. Land loans can be obtained for a maximum of 15 years, whereas home loans can be obtained for a maximum of 30 years.

The paperwork needed to apply for a land loan

You must submit the following standard documentation when you apply for a plot loan.  Be aware that different lenders may have different documentation requirements.

  1. Properly completed and signed loan application
  2. Passport-sized pictures
  3. Residence evidence
  4. Photo identification proof
  5. Income documentation, including pay stubs from the previous six months
  6. Bank statements for information on current loans
  7. Processing fee cheques drawn from a business or salary account
  8. Six most recent pay stubs


As the name implies, it is a loan for purchasing a plot on which you intend to build a home in the future. These loans are available to you at low-interest rates, and you may choose the term and repayment method.

A loan for land purchase also referred to as a land loan, is frequently mistaken for a home loan. The key distinction between a plot loan and a house loan is that a plot loan can only be used to buy land. On the other side, a home loan can be utilized to purchase a flat, apartment, or villa that is either being built or is already ready for habitation.