Short answer: A plot loan, also called a land purchase loan, pays for a house site, not a house. Banks and housing finance companies offer them, often only for plots in approved layouts, and usually expect you to build a house within a set time, such as three years. They may lend a smaller share of the price than a home loan: Indian Bank, for example, caps its plot loan at 75% of the plot's value. A loan for a bare plot does not, on its own, give you the home loan tax deductions.
This guide is for buyers in India, especially Tamil Nadu, who want to borrow to buy a plot. It was checked against the official websites of the RBI, the National Housing Bank, the Income Tax Department, State Bank of India and Indian Bank in October 2026.
Plot loan or home loan: the difference
A home loan pays to buy or build a house. A plot loan pays only for the land, on the basis that you will build a home there. The RBI's Housing Finance Companies Directions, 2025 count a plot loan as housing finance only if the borrower declares an intention to build a house within three years of taking the loan.
State Bank of India (SBI) offers SBI Realty to buy a plot, and you can take another home loan to build on it. Its Combo Home Loan covers the plot and the construction in one loan. These loans are for house sites: for agricultural land, ask the lender which scheme, if any, applies.
Who offers plot loans
Banks and housing finance companies (HFCs) both offer plot loans. Two examples from official bank pages:
| Point | SBI Realty | Indian Bank IB Plot Loan |
|---|---|---|
| Purpose | A plot for building a home | A house site owned outright, not leased, in a layout approved by the competent authority |
| Who can apply | Resident Indians aged 18 to 65 | Residents and NRIs (NRIs and PIOs cannot buy rural plots with it) |
| Maximum loan | Up to ₹15 crore | Up to ₹12 crore in metros; ₹6 crore urban, ₹2 crore semi-urban, ₹1 crore rural |
| Build deadline | House to be completed within 3 years of sanction or disbursement | Not stated on the page |
| Repayment | Confirm with the branch | Up to 180 monthly instalments |
How much you can borrow
Lenders lend a share of the plot's value, called the loan to value (LTV) ratio. You pay the rest, the margin, yourself.
- Indian Bank: LTV of not more than 75%, so you pay at least 25%. The loan is also limited to 36 times your gross monthly salary, or 3 times your annual net income if you are self-employed.
- SBI's most important terms, which cover SBI Realty, list LTV caps of 90% up to ₹30 lakh, 80% above ₹30 lakh up to ₹75 lakh, and 75% above ₹75 lakh.
- HFCs must keep to the same caps under the RBI's directions, and must leave stamp duty and registration charges out of the property cost (except where it is ₹10 lakh or less).
Plan to pay the margin, stamp duty and the registration fee from your own savings. The stamp duty and registration charges calculator helps you budget.
The deadline to build
- SBI Realty: the house should be completed within 3 years of the loan being sanctioned or disbursed.
- HFCs: you declare that you will build within 3 years of taking the loan.
- SBI Combo Home Loan: SBI's terms list a penal charge of 2% a year on the whole outstanding loan if construction is not completed within 24 months of the approved plan.
Tax: what a plot loan does not give you
The Income-tax Act, 2025 has applied since 1 April 2026. The home loan deductions people know as section 80C and section 24(b) now sit in section 123 (with Schedule XV) and section 22 of the new Act.
- Principal: section 123 covers repaying a loan for the purchase or construction of a residential house property, within ₹1,50,000 a year for all Schedule XV items.
- Interest: section 22 allows interest on money borrowed to acquire or construct a property under "Income from house property", which covers buildings and the land attached to them, not a bare plot.
- If you borrow to build, interest for the years before the house is completed is allowed in five equal parts from the year of completion, within yearly limits for a house you live in.
- Indian Bank's plot loan page states that interest and instalments repaid on that loan will not rank for income tax benefits.
- Under the new tax regime, which applies unless you opt out, the section 123 deduction is not allowed, and neither is the section 22(1)(b) interest deduction for a house you live in.
Ask a tax professional how this applies to your loan.
Documents lenders ask for
SBI's Realty and Combo loan pages list these papers, and Indian Bank's FAQ lists similar ones:
- Application form with passport size photographs
- Identity proof (PAN, passport, driving licence or voter ID) and address proof
- Salaried: salary slips or certificate, and Form 16 or income tax returns for two years
- Self-employed: income tax returns for three years (and, for the Combo loan, three years of accounts)
- Bank statements for six months, and the statement of any existing loan
- Property papers: the stamped sale agreement or allotment letter with all link documents, and payment receipts
Indian Bank takes the plot itself as security through a registered mortgage.
What to check before you borrow
- Layout approval: Indian Bank requires the layout to be approved by CMDA, DTCP or the statutory authority for the area. See how to check DTCP approval for a plot.
- Encumbrance certificate (EC): check the registered transactions on the plot. See how to get an EC online.
- Ownership: the plot should be owned outright, not leased. Check the patta (the revenue record of land ownership).
- Location: Indian Bank also wants the plot fenced or walled, in an accessible, developed or developing area.
- Your building budget: make sure you can build within the lender's deadline.
- Interest rate: rates change, so compare each lender's current rate before you sign.
Next steps
- DTCP approved plots for sale in Tamil Nadu: every listing on Gmore has a video tour.
- All plots for sale in Tamil Nadu
- Can NRIs buy land in India?
