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About Land Loan

About Banks in India

The first bank to get established in India was ‘Bank of Hindustan’ and ‘General Bank of India’ in 1770 and 1786 respectively. The largest and oldest bank is our ‘State Bank of India’ which came into existence as Bank of Calcutta in 1896 and immediately transformed to Bank of Bengal. Bank of Bengal was one among the three presidency banks that was established under the charters from British East India Company. Those three presidency banks were merged to form Imperial Bank of India in 1921. Later on, this bank became State Bank of India in 1955. Those presidency banks functioned like quasi-central bank until the time Reserve Bank of India established. In 1969, all the banks were nationalized by our Indian government. Slowly these banks designed their own financial schemes to aid person who is in need of money. There are specific loans like land loan, agricultural loan, personal loan, car loan, education loan etc to fulfill specific purpose.

Land Loan from banks

All Land loan lenders provide loans to customers who dream to buy a piece of land to construct their own home or to establish a commercial area. These loans are available to both salaried and self-employed and also to non-residential Indians. Land Loans enables the borrower to purchase exclusively a residential plot of land. Land loan should not be used to purchase an agricultural land. Few land loan lenders expect the target land to come within their municipal limits. Furthermore, some banks add on restrictive clauses that require the borrower to construct a building on the land within 6 months tenure.

The interest rate or loan rates collected for a land loan is on equivalence with the rate collected for a home loan. Unlike home loans, a person is not eligible to claim income tax deductions on the rate of interest submitted on land purchase loans. When a person proceeds for a loan for construction on the site, he or she became eligible for exemption from tax. In such a situation, one can claim for tax benefits on both the loan availed for purchase of land and loan received for construction of house. All tax deductions are eligible only when the construction gets completed and after the submission of proper completion certificate from the concerned authorities. A person who needs to avail a loan to procure a plot should get ready to pay larger amount as down payment. The loan-to-value (LTV) ratio is at times as high as 70%. Generally a person who proceeds for a home loan should make arrangements for about 20% of the total cost of the proposed land.

It is highly essential to employ the services of an experienced lawyer to verify and clarify all the concerned legal documents related to the target land. It is necessary to verify the layout drawing of the site as recognized by the concerned town planning authorities including no encumbrance certificate of the proposed land. Other documents related to property include the original documents displaying the ownership of the land, all revenue receipts, tax receipts and land records. The documents which the borrower needs to submit while applying for a land loan includes the original site ownership documents, drawing of the target layout, all the revenue receipts, tax receipts for the taxes paid by the owner, no objection certificate from the concerned society for sale and transfer of the land and no encumbrance certificate for the proposed land.

Some of the tips for getting easy land loan from banks

  • It is essential to have a good statement on applicant’s credit card which in turn offers a golden opportunity to enter into land development. A low credit score may end up in high monthly payments, loan rates and other charges.
  • It is advisable to prepare solid paper work and then approach the bank with clear and specific development plan for the construction and use of land. It makes the bank to trust the borrower.
  • It is good to produce all the data related to investment of the applicant like Mutual fund and insurance which in turn enhance their repaying capacity.
  • It is beneficial if the applicant contact few of the banks before settling with one among them. A perfect selection at the initial stage will definitely be rewarding for the applicant in the long run.

For further details regarding land loans, one can browse the internet to know about each and every bank individually and their specific scheme for the purchase and construction of dream home.

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