The rule behind every plot loan
A plot loan is a housing loan for land. The Reserve Bank of India's Master Circular on Housing Finance, dated 1 April 2025, lets banks finance the purchase of a plot only if the borrower declares that he or she intends to build a house on it, with the bank's money or otherwise, within a period the bank sets.
So a bank is not lending on land as an investment. It is lending on a future house. That one rule explains most of what follows: which plots qualify, how much you can borrow, and why there is a deadline to build.
Which plots banks lend on
Each bank has its own policy, but the plots that get loans have the same features:
- A residential site, not farm land. The land must be converted for non-agricultural use. Loans to buy agricultural land are a different product, usually meant for farmers.
- In an approved layout. The layout plan must be approved by the planning authority: a development authority such as HUDA in Hassan or CUDA in Chikkamagaluru, or the competent planning authority elsewhere. See layout approvals in Karnataka.
- With a khata. An e-khata from the city corporation, municipal council or gram panchayat, which you also need to register the sale. See A-khata, B-khata and e-khata.
- With clear, traceable title. The bank's lawyer reads the chain of title, the RTC, mutation and encumbrance certificate. See every paper to check.
- Reachable and valued. The bank's valuer visits, checks the road and boundaries, and puts a value on the site. Some banks lend less, or not at all, outside city limits.
Plots that usually do not get loans:
- Revenue sites, sold off farm land without conversion or approval
- Sites with only a B-khata, until converted to an A-khata
- Agricultural or plantation land
- Sites with a title gap, a pending case, or a mismatch between the deed, the RTC and the khata
Ask the bank whether it will lend on a specific layout before you pay an advance. A bank that already lends in that layout has done much of the legal work once.
How much you can borrow
The RBI caps the loan-to-value ratio (LTV, the loan as a share of the property's value) for individual housing loans:
| Loan amount | Maximum LTV |
|---|---|
| Up to ₹30 lakh | 90 per cent |
| Above ₹30 lakh, up to ₹75 lakh | 80 per cent |
| Above ₹75 lakh | 75 per cent |
The same circular says banks must not count stamp duty, registration and other documentation charges in the property's cost when they work out the LTV. The one exception is a house or unit costing ₹10 lakh or less. So budget for duty and fees from your own money. See stamp duty and registration in Karnataka.
These are ceilings. Banks often lend a smaller share on a bare plot than on a house. HDFC Bank, for example, states 80 per cent of the property cost for plot loans up to ₹75 lakh and 75 per cent above that, for direct allotment cases, and says this may be restricted to 70 per cent for a plot outside city limits. The bank also values the plot itself, which may be below your agreed price; the LTV applies to the lower figure.
What three major banks say
What each bank publishes on its own site, as checked in November 2026. Terms change; confirm them at the branch.
| Bank | What it offers for a plot | Conditions it states |
|---|---|---|
| SBI (SBI Realty) | A loan to buy a plot to build a house on; up to ₹15 crore | The house must be completed within 3 years of sanction or disbursal; a separate home loan can fund the building; resident Indians aged 18 to 65 |
| HDFC Bank | Plot loans for direct allotment and resale plots, and for building on a plot | LTV as above; may be capped at 70 per cent outside city limits; tenure up to 15 years; a penalty applies if construction does not start within the time set at sanction |
| Canara Bank | Purchase of a site and construction of a house on it, as one composite housing loan | The part of the loan used for the plot is capped at 60 per cent of the loan; margin of 10, 20 or 25 per cent by loan size, in line with the RBI slabs |
SBI's page gives two figures for the repayment period, 10 and 15 years, so ask the branch which applies to you. The pattern across all three is the same: the plot is the first step of a house, and the bank wants to see the house begin.
The deadline to build
Every plot loan comes with a time limit, set by the bank. Miss it and the bank may charge a higher rate, a penalty, or treat the loan differently, depending on the sanction terms. Before you sign:
- Read the exact deadline in the sanction letter, and from when it runs.
- Ask what counts as starting or finishing: a building licence, the foundation, or a completion certificate.
- Check that you can get a building licence on the site in time. That depends on the layout approval and the khata.
Tax: what to expect
While the land is only a plot, there is no tax deduction for the interest you pay, because there is no house yet. Once the house is built, the Income-tax Act 2025, in force from 1 April 2026, keeps the earlier rule that interest paid before completion can be claimed in five equal parts, starting with the year the house is completed. Limits apply, and whether you can claim at all depends on the tax regime you choose. Confirm your own position with a tax adviser before you count on it.
The steps, in order
- Find the site and check the papers yourself, or with us.
- Ask the bank whether it lends in that layout, and get its list of documents.
- Sign an agreement to sell with a clause that lets you exit, and get your advance back, if the loan is refused for legal reasons.
- Apply. The bank's lawyer checks title and its valuer visits the site.
- On sanction, read the LTV, rate, tenure and the deadline to build.
- Register the sale deed; the bank pays the seller and holds the original documents.
- Get a building plan approved, and apply for a construction loan or top-up if you need one.
How we help
We check whether a site is the kind banks lend on before you pay anything, and help you gather the papers the bank's lawyer will ask for. Sites in Kempegowda Layout, Mudigere are ones banks lend on. See our advisory service, or ask us about a site.
