LOANS FOR PLOTS

Mahesh took a home loan of Rs 20 lakhs from ICICI Bank to buy a fully constructed house and the total loan amount was paid to the vendor on Feb 6, 2008. The bank charged me a pre-EMI interest for the month of Feb 2008.

How can the bank charge a pre-EMI interest after the complete disbursement of a loan without starting the EMI?

The pre-EMI interest is only for the period between Feb 6 and (probably) March 1 (or whatever date the instalment date was in March). The first EMI would then be payable on Feb 1, 2008 (or in your case, whatever date the instalments is payable every month). The bank has lent the money to you on Feb 6, 2008 and the first monthly instalment will be due only in Feb 6, 2008 which contains interest only for one month. Hence the need for ICICI Bank to charge you a pre-EMI interest on your loan.

Plot loans are available on a more restricted basis than home loans and unless your builder is approved by the bank it may not provide a loan for a plot bought from a private developer. No tax deductions can be availed on this type of loan.

Mahesh took a joint loan with my brother of Rs 10 lakh. Interest amount of Rs 1,10,000 and principal of Rs 25,000 was paid. How much exemption will we both get?

SP Soot

Both of you will get the tax deduction benefits to the extent of your share in the loan.

The author is CEO apnaloan.com which is a complete guide to home loans in India.

Home Loans without Risk

Introduction:  When looking for the best loan, there are certain terms you will need to be familiar with. The fixed rate loan will keep the same interest rate and monthly repayment for the whole lifetime or term of the loan. This will generally be for a period of 10, 15, 20 or 30 years. If the rate is fixed for a period, such as the first 2 or perhaps 5 years, and then reverts to a variable rate it is known as an adjustable rate mortgage or ARM.



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Can I get home loan without a home? Some banks have conditions such as construction of house should commence within six months.

If I take a home loan to buy a plot of land and construct on it (site + construction), will I get tax rebate on the total EMIs (EMI for site + construction, or EMI for construction only)?

If you are buying a plot and constructing your own house, then banks will always stipulate a time limit for commencing the construction of the house.

The reason is that the banks may not want to fund the buying of a bare plot.

Even if they were willing to provide a loan for a plot of land, it may come at a higher cost and not at the home loan cost which is considerably cheaper than a plot loan.

If your intention is to build your own home, you should not have a problem with the time limit.

If, however, you want to buy a plot with an indeterminate plan to build a home sometime in the future, then you should seek a plot loan rather than a home loan.

Tax benefits on a land loan

The tax breaks are available on the full loan amount (site + construction) from the year in which the construction of the property is completed.

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