Most people refer to buying a new house or a plot of land as buying property. Although it may appear as a similar transaction, many don’t identify the difference between purchasing a residential apartment and a plot. The most common point of difference between the two is when you are applying for loans.
Homebuyers, today, have two choices when it comes to buying a house – a ready-to-move-in/ under construction flat or a residential plot. Although the due diligence, EMI structures and the overall procedure of investing in a property may appear similar, there are some noteworthy differences that can help you make an informed decision.
A home loan is availed for ready-to-move-in, under-construction or resale properties, and even those that will be self-constructed. On the other hand, a land or plot loan is availed for the purchase of a piece of land that will solely be used for residential purposes. A home loan cannot be availed for the purpose of buying land upon which you intend to build a house. In the same way, one cannot apply for a land loan if they wish to buy a ready apartment or villa.
Tenure and EMI structure play a significant role in any type of loan application. Home loans have a longer tenure of repayment in comparison to land loans. A home loan tenure can be as long as 30 years, whereas a land loan does not exceed 15 years in most cases.
On a housing loan, an applicant can avail tax deductions on both, the principal amount and the payment of interest. On the other hand, if one applies for a loan/plot loan, he/she can avail tax benefits only after the construction of the property on that land, and that too only on the loan amount that was taken against construction.
Loan to Value (LTV)
This refers to the amount of loan one can get against a property. The LTV ratio for home loans is roughly 75-90% i.e. the applicant can get a loan of around 75-90% of the total value of the property. Whereas for plot loans, the maximum LTV us capped at 80% depending on the loan amount. This implies that if you wish to purchase a land loan for your personal use or for investment purposes, you will have to put in at least 20% of the funds from your own pocket.
Home loans and land loans are often used interchangeably. It is easy to get confused between the terms and conditions of both types of loans, however, these key points would hopefully point you in the right direction depending on your requirement. If you are looking for some of the best housing opportunities across India, then you must definitely check out the plots and apartments in Chennai by Casagrand developers. They are not only among the best investment opportunities, but also ideal for personal use. You can now buy plots in Chennai or view ready-to-move-in projects with a click of a button. At Casagrand, it is not only easy to buy property in Chennai, but also make some highly rewarding choices for future investments.