Loans for home and land may seem to be the same since both are part of real estate. But in financial terms, home loan and land loan differ in a few major areas. Banks and Non-banking financial institutions (NBFCs) provide both loans. Also, despite certain differences, the rules for processing the loans are exactly the same. Let us look at the differences now;
Home loans can be availed for houses that are ready to sale, under-construction, or approved for construction in the future. Such loans are given for any property inclusive of all locations.
However, land loans are only given for residential properties located within a Municipal or Corporation area. The property has to be a non-agricultural and a non-commercial property.
Home loans can be repaid over a period of 30 years maximum. Land loans, on the other hand, have a maximum tenure of 15 years.
LTV ratio is 75-90% for homes whereas for a land loan is 75-80% of the property value. This means that one can get a home loan of about 90% of the value of the property. However, for a land loan, the buyer has to make a down payment of about 20% of the property value. In smaller cities, LTV is lower for land loans.
If you take a home loan, you can avail tax deductions in repayment of both principal and interest amounts. But, for a land loan, tax deductions are applicable only on the amount taken for construction on the plot. The tax deduction would start only after the completion of the construction.