Real estate – Land loans

In recent decades, real estate has experienced an unimaginable boom in India which was even recognised globally. Real estate is proved to hold second highest employer which is supposed to grow by 30% in upcoming years, succeeded by agriculture at its lead position. Real estate can be segmented into 4 slices – retail, housing, commercial and hospitality. Real estate will retain its kick until the thirst for space exists in the country. The thirst is researched to be more in corporate where demand survives for office space. Research has also claimed that NRIs would be a major source of investments in real estate. It is now being believed that land and gold are investments with good returns. Real estate in India is projected to reach $180 billion by 2020 with a CAGR of 11.2%. Housing segment alone contributed around 6% of last year’s GDP.

In such a booming scenario, individuals consider real estate to be considered to be a preferable investment in India. Individuals generally choose to go for housing loans which would also provide tax benefits. Construction of new house, modifying existing house can be funded through housing loans. But buying plots are more in number than building homes. Even people prefer buying plots in bulk and would either wish to sell it in individual or would even prefer to build apartments in near future. So, in such scenarios land loans can be opted.

Land loans are preferred when a vacant plot has to be bought, which holds same interest rates and procedures though some minute differences exist. Individuals can even opt for land loan to buy vacant plot and then go for housing loan in near future to build their dream homes, though a stipulated period will be mentioned by most of Indian banks. Land loan can be obtained to a cap of 70% of plot value while home loans can be obtained upto a cap of 80 – 85% of asset value. Major drawback is that one can never claim tax benefit from land loan and also tenure is allowed to be 15 years whereas for home loan it is allowed upto 30 years.

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