Plot loan vs Home loan Key Difference and Benefits

Updated on: 02 Sep 2025 // 2 min read // Home Loans // Home Loan Balance Transfer

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Buying property is a huge financial decision in life. Whether you are thinking of investing in land for house construction in future or buying a ready-to-move-in house, choosing the right loan type is crucial. There are two commonly popular housing finance options available, i.e. Plot Loans and Home Loans. While both are helpful in acquiring property, there are many significant differences in their features, benefits, and eligibility.

Here are some key differences between a Plot Loan and Home Loan:

Feature	Home Loan	Plot Loan
Purpose	Purchase/construct/renovate a ready-to-move or under-construction house/flat	Plot loan can be sued to purchase a residential plot/land
Restriction on Usage	Can be used for ready/ under-construction/ self-construction properties	Land must be used for residential purpose only (not agricultural or industrial)
Loan-to-Value (LTV) Ratio	Up to 80% - 90% of property’s value	Usually up to 70% - 75% of plot’s cost
Tax Benefits	Available under Section 80C (principal component) and Section 24(b) (interest component) of the Income Tax Act	No tax deduction available on plot loan EMI payments
Repayment Tenure	Longer tenure up to 30 years	Shorter tenure up to 10 to 15 years
Rate of Interest	Lower interest rate than plot loans	Slightly higher interest rate than home loans as they are riskier for banks
Location Restrictions	Wider acceptance, including approved projects, resale, and self-construction	Generally available for locations only in municipal or approved areas
Loan Conversion	Not applicable	Can be converted later into a composite loan (plot + construction)
Disbursement	Disbursed in stages for construction and lump sum for ready-to-move	Disbursed in lump sum to buy the land and in stages for composite loans (plot + construction)

Plot Loan Benefits

Flexibility to buy land now and construct a house later at your convenience.
Plot loan offers investment growth as land often appreciates faster than a house property in prime locations.
Many lenders offer composite loan option, i.e. plot + construction loan, reducing hassle if you are planning to build a house within a few years.

Home Loan Benefits

Home loans offer a ready housing solution as you can get immediate possession to use the property for staying or earning rental income.
If you have an excellent credit score, you can get best home loan interest rates and can also improve your home loan eligibility.
Higher LTV ratio and longer repayment tenure make EMIs more affordable.
Tax deduction available on both principal repayment (up to Rs. 1.5 Lakhs under Section 80C) and interest amount (up to Rs. 2 Lakhs under Section 24b).
Some lenders offer home loan for women at concession interest rates.
Owning a home gives financial security and peace of mind.
You can use a home loan EMI calculator to know your EMIs beforehand.

Which Loan Should You Choose?

Choose a Plot Loan if you are planning a long-term investment or want to construct your dream house later.

Choose a Home Loan if you want to move in your house immediately, pay stable EMIs, and avail of tax benefits.

In short, a plot loan gives more flexibility and investment potential, while a housing loan offers immediate housing and tax benefits. The right choice of loan depends on your needs, budget, financial goals, and timeline for construction.

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Plot loan vs Home loan Key Difference and Benefits

Here are some key differences between a Plot Loan and Home Loan:

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