Do we have option in any bank to take plot only loan without construction in future (atleast for 5 years)? Or is it necessary to start construction within specified limit provided by bank in the plot Loan?
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  • to my knowledge, there is no plot loan as such. You can opt for Land + construction loan. Usually the construction should start within 2 yrs. This time line is given for the reason that the interest rates of housing loans are much lower than other mortgage/personal loans. Hence if we dont start construction, bank will increase the interest rates to that of Mortgage rates usually some percentage higher.

    I have bought a land in 2015, in 2018 I got a letter to provide construction proof like plans and approvals etc, if not they said that they will automatically adjust the rates to mortgage loans.
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  • You would need to take a personal loan or mortgage the land.


    For someone looking to finance the land & the construction on it, there is a Composite Loan. The land+construction loan is called a composite loan. When you apply for a composite loan, you will need to inform the bank about your plans to construct. You will also need to submit your construction plans. Accordingly, the bank will approve your loan and disburse the amount in tranches.

    A composite loan suits you if you are planning to start constructing your house immediately. If you plan to start building later, then you should opt for a land loan instead.

    When you take a composite loan, you have to build a house on that plot. This is mandatory. So take a composite loan only if you are sure of building a house within a year or two. Otherwise, go for a land loan only.

    Usually, your loan agreement will state that you must start construction between 1-2 years. If you don’t start construction within that time, the bank may increase your interest rate. The bank may also ask you to repay the loan and close it.


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