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How are land loans different from home loans?

How are land loans different from home loans?

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Investing your money in real estate is a milestone in your life and believe it or not, it is bound to change your life right from the next instant. It doesn’t matter whether you are a first-time investor or not, it’s extremely important to know about loans and how they ease the entire buying process for you. Buying a home or a plot of land may not seem different to most and both are usually considered as a home loan but it’s important to consider the differences while applying for the loan. Although the terms and conditions, the application processes, and the tenure of both the loans are quite similar, there are some fundamental differences between home loans and land loans. The most important factor when it comes to home loans is eligibility. Let’s check out the difference between home loans and land loans.

Home Loans 

Home loans are availed to the eligible people for the purchase of residential properties that are to be constructed in the future, or for under construction, or for ready-to-move-in properties.

  • You can get a home loan to any type of residential property in any location of your preference
  • Any resident of India and NRI’s are eligible for home loans
  • The maximum tenure of the home loan can be 30 years
  • If both the husband and wife have separate sources of income are co-owners of the property, both can claim an income tax deduction on the loan separately
  • Tax deductions can be availed for both the principal and interest payments
  • The loan-to-value (LTV) ratio is between 75% and 90% of the total cost of the property, depending on the lenders
  • Interest rates are at an all-time low ranging between 6.65%-8.00% depending on the lenders

Land Loans

A land loan can only be used to buy a plot of land that has been earmarked for residential real estate construction.

  • The location for the plot should be within the limits of the municipality or the corporation or in industrial or rural areas
  • Only residents of India are eligible for land loans
  • Land loans cannot be used for the purchase of agricultural land
  • The maximum tenure of the land loan is 15 years
  • No tax deduction for the purchase of the property, the tax deduction is only eligible for construction of the property on the plot and can only be claimed after the completion of the construction
  • The loan-to-value (LTV) ratio is up to 75% which means that 70%-75% of the total value of the property will be provided as a loan
  • You can avail of a plot loan to purchase a plot through direct allotment or to buy a resale plot, depending on the respective lender
  • The interest rates are about 0.75%-1% higher than the home loans

At TMR Group, we aim to bring promising ROIs in the shape of RERA and HMDA approved plots in Hyderabad. Our projects have precisely designed layouts in the most sought-after locations of Hyderabad that have a great potential to multiply your investments in the upcoming future. Check out www.tmrinfra.com to know more about us and our work. Get in touch with us!

Home Loans for NRI’s

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Real estate developers have always considered NRI’s as an important part of their target audience and the NRI crowd also prefers investing in India because when a comparison is made with the foreign real-estate, India offers much better properties at a much reasonable price making it an ideal choice for NRI’s.

NRI’s Investment Market in India

NRI’s have always played a crucial role in the Indian real estate market. The main reason for their investment is generally either sentimental value to their origin or as a backup plan just in case they ever plan on moving back to India. Generally, they just buy and put up properties for rents assuring a steady sum of the amount coming to them with definite safety and increment in their investment. The currency advantage due to the depreciating rupee plays into their favor, raising their purchasing power. To smoothen the pot, NRI’s can also apply for home loans and they get similar tax benefits like the Residential Indians with respect to repayment and interest rate if they meet a few criteria. Foreign Exchange Management Act 1999, defines an NRI as someone who resides outside India for, “employment, carrying on business or vocation in circumstances as would indicate an intention to stay outside India for an indefinite period”. It also says that an individual will also be considered NRI if his/her stay in India has been less than 182 days during the preceding financial year and anyone meeting these criteria can apply for home loans in India. 

Benefits for NRI’s Investing in India

NRIs can be benefitted from the tax deductions only if they have an income that is taxable in India. If they have taxable income in India, they are eligible to claim deductions on the repayment of interest and the principal amount from the taxable income as per Section 24, 80C and 80EE of the Income Tax Act.

Here’s a list of all the benefits NRI’s can get while investing in real-estate in India if they are defined under FEMA:

  1. An NRI home loan can be availed to meet all of the property-related requirements, including purchasing a house, constructing a house and renovating an existing property in the country.
  2. The difference between the value of foreign currencies like dollar or euro in comparison to rupee give a great advantage and raises purchasing power.
  3. The application process is hassle-free and barely takes up any time.
  4. With most banks, a candidate can apply for an NRI home loan online. The process is easy and transparent. The tracking of the application is also very easy, from anywhere in the world.
  5. Almost all banks provide a prepayment facility for either none or very little extra fees.
  6. There is no restriction on the number of properties NRI’s can purchase in India. However, agricultural land, plantation land, or a farmhouse cannot be purchased, only residential and commercial properties.

Home Loan Interest Rates for NRI’s

Most banks offer NRI home loans that have attractive interest rates on a monthly reducing basis. The candidates also have the option to choose between fixed or a floating interest rate but the candidates must be under the following regulations:

  • Age: 18-70 years
  • Nationality: Indian, Non-resident Indians (NRIs) and Persons of Indian Origin (PIOs) are all eligible. Overseas Citizens of India (OCIs) are also eligible except citizens of Afghanistan, Bangladesh, Bhutan, China, Iran, Nepal, Pakistan and Sri Lanka.
  • Work Experience: At least two years of experience in the company he/she currently works for
  • Loan Amount: The amount depends on an individual borrower’s profile and differs from person to person
  • Loan Tenure: Most banks allow a loan tenure of up to 30 years
  • Prepayment Charges: The prepayment charges for most lenders are 0%-2%
  • Late Payment Charges:For most lenders, late payment charges are 1%-3%
  • Other Prerequisites: NRIs require an Indian resident to be a co-applicant, co-borrower or co-owner of the respective house or property
  • Interest Rates: Interest rates vary for different banks, like SBI and HDFC offer 6.70%-7.00%pa, ICICI offers 6.70%-7.95%pa, LIC Housing Finance offers 6.90%-7.30%. The overall range of the interest rates is 6.70%-8.90% in 2021.

TMR Group believes that every NRI is still as much Indian as the rest of us. Therefore, all our projects offer the best deals on home loans for NRIs. They have excelled in their field and are making India proud overseas. It is our humble way to say – thank you and offer them NA plots in Hyderabad with the best returns.