Land Loan v/s Home Loan - Difference Explained | Kotak Mahindra Bank - Home Loan Stories

28 SEPTEMBER, 2021

Many borrowers are confused between home loans and land loans. Sure, they both help you fulfil the dream of moving into your own house, but they have various distinct differences. Want to know more?

Go through the difference between a land loan and a home loan in the article below.

Home loan

A home loan is a secured loan where you can borrow money to purchase a house from a bank or financial institution at a certain rate of interest. You can take a home loan at a floating or fixed home loan interest rate. The tenure of a housing loan is usually up to 20 years.

Land loan

A land loan is an amount of money that you can borrow from a bank or financial institution to buy a plot of land to construct a house on it. Often lenders set a time limit while approving the loan within which you must construct a house on the land. The tenure of the land loan is up to 15 years. Many lenders provide composite loans to help you purchase land and build a house on it.

Difference between Land Loan and Home Loan

Basis Home loan Land loan
Eligibility 1. Everyone, including Non- Resident Indians (NRI) can avail a home loan.
2. There are usually no restrictions on the type of properties you can buy with a home loan.
1. Only resident Indians can avail land loans and it is not offered to NRIs.
2. You can buy only limited land types with a land loan as directed by authorities. For, e.g. you might not be able to buy agricultural land as they are for marginal farmers.
Tenure Home loans are for up to 20 years Land loans are for up to 15 years.
Interest rates Home loan Interest rates are lower than that of unsecured loans. Interest rates of land loans are slightly higher than home loans.
LTV ratio Housing loans have a higher LTV ratio. You can get a loan up to 90% of your property value. The LTV of land loans is lower than home loans. You can get a land loan of up to 70-75% of the land.
Location of property You can avail a home loan to buy a house anywhere, even one located outside the city or not within municipality limits Typically, land loan is not available if you wish to buy land situated outside municipal limits or in villages and industrial areas.
Tax benefits You can avail tax benefits on interest and principal repayment on home loan There are no tax benefits available on a land loan.

While land loan and home loan fulfil your dream of owning a house, they both have different purposes. Depending on the lender you contact, you might not be able to purchase a house with a land loan and vice versa. Therefore, it's imperative to identify your needs and apply for the loan type that suits your requirements.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.