Top 6 Tips to Get a Home Loan for Land Purchase - Kotak Bank
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23 NOVEMBER, 2022

An investment in any land or plot can deliver substantial returns over time. The value of the land at a good location is likely to appreciate significantly in the long run. Lands are purchased for residential and investment purposes.  

Purchasing land can be an expensive decision that requires a lot of financing. However, you can purchase your desired property with the help of plot loans. By availing of a loan for land purchase, you can reduce your economic burden as it can cover up to 80% of the cost of the property.

Acquiring a loan for a plot purchase is more challenging than getting a regular home loan. Moreover, a lack of knowledge regarding the approval process can make it more difficult. The tips below will help you quickly obtain a loan for plot purchase and construction.

Essential Tips to Secure a Loan for Land Purchase

1. Conduct Proper Research

Before you apply for a loan to buy a plot, you must conduct a proper survey to determine the potential of the plot area. Location is an essential factor that influences the feasibility of any construction. Proper research is necessary to determine the scope of development in that locality. Consider the following before applying for a loan:

  • Does the locality offer easy access to basic amenities?
  • Does the area have homes constructed by other people?
  • Over the last decade, what has been the kind of land appreciation?
  • What is the potential for further development in that locality?

You can approach a lender for a loan. Multiple lenders in the market offer land loans. Compare products, processing charges, interest rates, and other fees are essential. Seek a financial organisation that matches your needs. Choose a lender offering an EMI option that suits your requirement.

2. Have a Satisfactory Credit Score

One of the essential factors influencing your loan application is your credit score. A credit score is a 3-digit number that ranges between 300 and 900. Your credit history gives complete information about your debt management to date.

It reveals all the loans you’ve availed of so far, the repayment record and also shows if there are any defaults. Your credit score determines your creditworthiness by revealing your financial habits.

A credit score close to 800-900 is considered a good number. It will help you in winning the lender’s trust. Therefore, you must maintain a good credit score to secure a loan on an open plot

3. Submit All the Required Land Documents

The lender carefully examines necessary documents while processing any land loan application. Submission of forged land documents can put your loan application in danger. Therefore, checking the documents of the land you wish to purchase is essential. Ensure the following:

  • Make sure the title deed mentions the purpose of the land.
  • Examine the encumbrance certificate to ensure the land has no unsettled legal cases.
  • Obtain a release certificate from the bank, which states that there is no pending land loan before the land is resold.
  • Verify that there is no irregularity in the payment of property tax.
  • Ensure that the land has all necessary approvals from the local authorities.
  • Ensure the previous land owner has not pledged the land as collateral.

Failure to submit all the required documents will make it hard to secure a loan for land purchase. It can also result in rejecting your loan application as these documents provide all the information about the land.

4. Make a Higher Down Payment

Down payment refers to the money you pay when obtaining a loan. Banks and many other financial organisations usually expect you to pay 15 – 30% of the land value as a down payment while securing a loan.

You can improve your chances of getting the loan approved if you agree to pay a larger down payment. A higher amount of down payment will significantly reduce the risk of loan approval for the lender. Therefore, your chance of obtaining the loan increases drastically.   

5. Gain Knowledge about Your Debt to Income Ratio

Your Debt to Income Ratio shows how much of your monthly income is used to pay your debt obligations. Understanding this ratio will help you plan your expenses. Lenders use this ratio to determine your borrowing risk.

It is recommended to spend less than 50% of your monthly revenue on loan EMIs. You should ensure that the loan amount aligns with your monthly income. Otherwise, your loan application may be rejected. 

6. Opt For Construction Loan If You Plan to Construct on Your Land

If you plan to build property on the land, applying for a construction loan will serve both purposes. It is a wise way. It is easier to obtain a construction loan as the constructed building and the land lead to a higher value. It offers multiple benefits along with lower interest rates. You are eligible for tax exemption under SEC 80C as per the income tax regulations.


When you apply for a loan for a plot purchase, two significant factors that influence its approval are the purpose and quality of investment and your capacity to repay the loan. Once your loan to buy a plot gets sanctioned, you should gain knowledge about specific terms, such as early foreclosure fees on your land loan.

Please note that you cannot claim any tax benefits on land loans if you don’t build a property. You can consider consulting with an expert to guide you through the entire procedure. And make sure you follow the tips mentioned above to make the perfect investment in real estate in the long run.

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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.