Plot and Construction Loan
In this article, we will discuss plot and construction loans from SBI Bank in detail. But before discussing the SBI aspect we will discuss plot and construction loan in general.
In India, banks give plot loans to eligible applicants. This loan is applicable for buying land for residential purposes. One can avail loan facility at an attractive rate of interest and can be repaid back in affordable EMIs. But this loan is different from the home loan as the house will be constructed later. A plot loan is suitable to buy a residential plot of loan for investment purposes or to construct a house of your own choice.
In case you wish to construct the house within the specified time frame outlined by banks generally within 3-5 years then you can opt for a composite loan which comes with a construction loan as well. However, if you’re looking to buy a plot of loan only for investment purposes then a plot loan will be a more suitable option.
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What is difference between Plot and Construction Loan from SBI Bank
SBI offers a composite loan which is a plot cum construction loan. In which a loan can be sanctioned to purchase a plot for the construction of the home. However, the construction of the house should take place within 5years from the date of the loan sanctioned. However, if you fails to construct a home within 5 years then this composite loan gets convert into a commercial loan at a higher rate of interest of 1%. Hence, it’s a combination of plot and construction loan so it covers the cost of the plot plus construction cost up to 70-80% depending upon of CIBIL score.
In the case of composite loans, the bank will disburse the amount in tranches or installments. The first installment will be disbursed for land purchase and the subsequent one will be for house construction on the basis of your construction plans and progress.
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Features of Composite Loan
- SBI offers a low-interest rate of 7.5% onwards.
- Low Processing fee of 0.35% of the loan amount+ taxes, subject to a minimum of Rs.2000 and maximum of Rs.10000
- Tenure up to 10 years.
- Loan max amount is 15 crores. Wherein 70% of the property value and 80% of the construction value will be sanctioned.
- Interest rate is calculated on a daily reducing balance.
- Interest of 0.05% will be provided as a concession if the co-applicant is a women borrower.
- Eligibility criteria is 18-65 years of age.
- In addition, legal Verification charges( Advocate and valuer fee) is mandatory and totally depends on professional fee but can go up to an additional Rs.10000/-.
- Above all, stamp duty will be charged on the loan agreement hence need to be paid to the bank.
Moreover, home insurance is included within the package in case you would like to opt-out please do inform the executive. - No Pre-payment penalty on re-payment of the payment.
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Process & Document
| Proof of Identity | Pancard, Passport, Voter’s ID, Aadhar Card, Driving License |
| Proof of Address | Aadhar Card, Utility bills, Driving License. |
| Income Proof | Bank statement of salary account for last three months and last six months salary slips ( For Salaried Individuals) and audited financial statements of the past two years for self-employed individuals. |
Additional Documents required
| Salaried Individuals | Original Salary Certificate from employer TDS certificate on Form 16 or copy of IT Returns for last two financial years, duly acknowledged by IT Deptt. |
| Professionals/self-employed/ other IT assesses: | Acknowledgment copy of three years I.T. returns/ Assessment Orders. Photocopies of challans evidencing payment of Advance Income Tax |
| Property Documents | Sale deed or sale purchase agreement. |
| Photographs | 2 passport-sized. |
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Steps to apply online for Land or Construction loan:
Time needed: 1 minute
You can apply for SBI composite loan in these simple steps:
- Online Apply
Click on this URL: https://onlineapply.sbi.co.in/personal-banking/home-loan
- Relationship
Page will prompt you to answer having an existing relationship with SBI? Yes or No.
- Property
In case you’re a new customer, you need to furnish property details by selecting the purpose of the loan as a purchase or construct on identified property.
- Composite Loan
Followed by the selection property category. In case of only land only select purchase of plot otherwise in case of composite loan select construction on a residential plot owned by you.
- Personal Details
Need to provide the cost of the plot, applicant details like dob, gender, residential status, and income details as salaried or self-employed.
- Co-applicant Details
If any co-applicant add their details or else proceed.
- Preferred Location
Key in preferred location for availing the loan as a place of residence or property with its state.
- CAPTCHA
Capture the CAPTCHA displaying and agreed to be contacted by SBI over the call or email and view the quote as per your eligibility.
- Eligibility
On this page, you can see your loan eligibility with processing fee, loan amount, tenure, interest rate with EMI amount, and then click on apply now.
- OTP
Verify your mobile number and email address with OTP verification.
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Interest Rates
Please find the current rate card for availing loan with SBI Bank:
| Loan Amount | Card Rate |
| Up to 30 lacs | EBR+85bps (7.50%) |
| Between 30 lacs to 75 lacs | EBR+95bps (7.60%) |
| Above 75lacs | EBR+105bps(7.70%) |
Note:
- A premium 10bps will be added to the rate card for customers falling under risk grades 04 to 06.
- 05 bps will be given as a concession for women applicants.
- A premium of 05 bps will add if you’re not holding a salary account with SBI.
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What are Tax Benefits for Plot & Construction Loan?
Plot loan will not offer any tax benefit to applicants unless a construction loan is taken. A tax deduction can only be claimed after the construction has been completed not on the purchase of the land.
You can avail of tax benefits subject to the terms and conditions outlined by the income tax department.
As per the guidelines, the construction of the house must be completed within the stipulated time frame. The maximum deduction of Rs. 2 lakh and Rs. 1.5 lakh on the interest paid on housing loan and principal repayment, respectively, you can claim from the year in which the house construction is completed.
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Conclusion
The composite loan is only beneficial if you’re looking to construct the plot on an immediate basis which would help in getting tax benefits as well as building the house of your dreams as per your choice. If the plot is purchased only for the purpose of investment then go for plot loan only. In the future, if you feel like constructing the house you can take a construction loan from SBI itself and can avail of the tax benefit also.
Frequently Asked Questions
Almost all banks which come under the jurisdiction of RBI provide plot and construction loans.
It’s a composite loan by SBI for the purchase of land plus construction on the plot.
You can apply online to review the quote as per the eligibility and connect with SBI executive for further processing.
Yes, SBI gives loans to buy land also termed as plot loan
There is no tax benefit on availing loan on plot/land.
Up to 70% of the property value.
As per SBI guidelines, they don’t sanction loan on buying property from your father as this type of transaction’s money can be used for other reasons as you are bound to get the property.
Secondly, if the property is in your father’s name so the bank will not give you a loan as the same cannot be considered collateral. Therefore, you can ask your father to take a loan on your behalf if he is within the eligibility criteria of age.
In order to get a loan, income proofs are a must as these are the fundamentals to check before sanctioning a loan as banks like to understand your repaying capacity.
Some NBFCs do provide loans but the procedure is too tedious and chances of approval are very low.