You've found the plot. You've checked the approvals. You walk into a bank expecting the same deal your friend got on their flat — 90% funding, twenty years, tax deduction from year one.
You'll get none of those three.
A plot loan and a home loan are different products with different rules, and the difference typically costs a first-time land buyer several lakh rupees in upfront cash they hadn't planned for. Here's exactly where the gap is.
The four differences that matter Plot loan Home loan Loan-to-value ~70–75% of plot value ~80–90% of property value Maximum tenure Usually 10–15 years Up to 30 years Interest rate Slightly higher Lower Tax deduction Only after you build From possession
Figures are typical market ranges as of 2026 and vary by lender, plot location and borrower profile. Some lenders stretch LTV higher on smaller-ticket plots; others sit lower on land far from the city.
- You'll need a much bigger down payment
This is the one that catches people. On a ₹50 lakh flat at 85% funding, you arrange ₹7.5 lakh. On a ₹50 lakh plot at 75%, you arrange ₹12.5 lakh — two-thirds more, before stamp duty and registration.
Lenders price land as the riskier asset because it produces no income and can sit undeveloped indefinitely. That risk is passed to you as a larger down payment.
- Shorter tenure means a heavier EMI
A home loan can stretch to thirty years. A plot loan usually caps around fifteen. The same borrowed amount compressed into half the years produces a materially higher monthly outgo — so budget on tenure, not just on the loan amount.
- The rate is higher
Plot loans are typically offered at floating rates a little above equivalent home loan rates. Small on paper; meaningful across a decade.
- The tax treatment is the real trap
And it deserves its own section, because almost everyone gets this wrong.
The tax rules, stated plainly
While your plot is just a plot, you get nothing.
No Section 24(b) deduction on interest. No Section 80C deduction on principal. Land that sits undeveloped generates no income tax benefit at all — however much interest you're paying on it.
The deductions only switch on when there is a house on the land. Specifically:
Once construction is complete and you convert the plot loan into a home loan, you can claim interest under Section 24(b) — up to ₹2 lakh a year. Interest paid during the construction period isn't lost. It can be claimed in five equal instalments, beginning after construction completes. Construction must generally be completed within five years from the end of the financial year in which the loan was taken, or the benefit is curtailed. Principal repayment under Section 80C becomes claimable only after the house is built and possession taken. Stamp duty and registration charges, however, can be claimed under 80C in the year you actually pay them. You'll need the completion and occupancy certificates to convert the loan and unlock any of this. The 2026 wrinkle nobody mentions
Since the New Tax Regime became the default, Section 80C and Section 24(b) deductions are not available for a self-occupied house under that regime at all. Only interest on a let-out property remains claimable, capped against rental income.
In practice: if you're on the new regime and building a home to live in, the "tax benefit" argument for a plot loan may be worth nothing to you. It only pays off if you're on the old regime, or the property will be rented out.
Run the numbers for your regime before you let a tax argument influence the purchase. This is worth twenty minutes with a chartered accountant.
The composite loan — usually the better structure
If you intend to build reasonably soon, ask your lender about a composite loan instead: a single facility covering the plot purchase and the construction together.
It behaves far more like a home loan. The funds are released in stages — plot first, then against construction milestones — and the tax benefits become available considerably sooner than they would under a plain plot loan.
The trade-off is a commitment to actually build, usually within a defined window. If your plan is genuinely to buy land and build within two or three years, a composite loan is almost always the smarter structure. If you're buying purely to hold as an investment, it isn't available to you — and a plot loan with clear eyes is the honest choice.
What lenders will ask for on land
Plot loans carry heavier documentation than home loans, because the bank is underwriting the land title rather than a completed building.
Clear, marketable title and the full ownership chain Approved layout and land converted to non-agricultural / residential use The plot must generally fall within municipal or development-authority limits — many lenders will not fund land outside them An encumbrance certificate confirming no existing charge on the land RERA registration where the project requires it
Two practical consequences. First, agricultural land is usually not financeable at all. Second, an unapproved layout is not just a legal risk — it's often simply un-loanable, which quietly shrinks your future buyer pool as well.
A short checklist before you commit Confirm your actual LTV with the lender in writing before you pay any booking amount. Assume 70–75%, not 90%. Work backwards from the EMI, using the shorter tenure you'll actually be offered. Check whether the plot is inside municipal limits — this alone decides financeability for many lenders. Decide honestly whether you'll build. If yes, ask about a composite loan. If no, don't count on tax benefits. Check which tax regime you're on before valuing any deduction at all. Budget stamp duty and registration separately — they're not covered by the loan. The bottom line
A plot loan isn't a worse product than a home loan. It's a different one, priced for a different risk — and it's entirely usable once you plan around it.
What hurts people is discovering the gap late: shortlisting on the assumption of 90% funding, then finding they need lakhs more in cash a week before registry. Sort the financing first, then shortlist. Not the other way round.
Every plot on Proptics shows its approval status and RERA number up front — which is exactly what your lender will ask for. Live per-square-foot pricing, 0% brokerage, no registration needed to look.
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