How to secure a plot loan - Fine tune your approach

This article explains the steps to take before applying for a plot loan.

If it has been your dearest wish to build a house on your plot of land, then it’s time to make this dream a reality. loan, and then secure further funding to build your dream house on it.

Before you apply for the loan for land, do consider the following tips:

  1. Study the land records. There are umpteen cases (and still counting) of prospective buyers being shown plots that do not have clear titles, or whose land reservation is suspect. You can visit the local tehsildar office and ask to see the land records. The records will show the reservation of the plot and whether the same has been modified recently, apart from its exact location and dimensions. Next, you can go through the plot papers and show them to a lawyer – the lawyer can check for title clearance. Plot loans can be approved only if the land title is clear, so this is a necessary step.
  2. Take a look at the neighbourhood. Once you have studied the land documents and confirmed its credentials, it is time to take a look at the plot in detail. Meanwhile, you can walk around the neighbourhood to see how far the closest shops are, where the access road leads to, the nearest transport hubs, etc. Ideally, everything you need must be located in the vicinity. Also check whether the access road to the plot is being encroached by another home, or if the local civic body has any plans to create new roads or infrastructure that can impact your plot in any way.
  3. Assess the future resale potential. You might purchase the plot of land for investment or to build a house on it. If you merely wish to use it as an investment, then you must examine its potential for resale. If the plot is not going to appreciate much in value over the years, then you might wish to reconsider it. Appreciation is guaranteed when the area sees infrastructural development, or if the region attains municipality status, or when luxury housing is constructed there. Experienced brokers and reputed housing finance companies can discuss the future resale potential of the plot with you.
  4. Check the LTV for the plot. Next, you must approach the housing finance agency for a land loan. When applying for the loan, check the LTV (Loan to Value) ratio of the land purchase loan for plot – the lower the LTV, the more you must pay from your own resources. In most cases, the LTV for plot loans is fixed at about 70% of the plot’s value. Once you get the LTV figures, you must assess your finances to gauge how much money you can raise privately to complete the plot purchase.
  5. Study your finances – you might need a further loan for construction. Once you purchase the plot with a land loan, you must train your attention to building a house on the land. You might wish to put off construction for a while, or you may go ahead with your plans if you are eligible for a house construction loan. Your appointed architect and structural engineer can draw up house plans and let you know how much constructing the house will cost you.

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