What is a composite Loan?
A composite loan is a loan extended by banks and financial institutions for the purpose of purchasing a plot of land and constructing a house on it within a given timeline. It's a combination of a plot loan and a construction loan. With this type of loan, both land and construction of the house are covered.
The land + construction loan is called a composite loan.
Things to keep in mind while taking a composite loan:
- A composite loan suits you if you are planning to start constructing your house immediately.
- By combining charges for both land and construction in a single loan application, a composite loan may be more cost-effective than a land loan.
- When you take a composite loan, you have to build a house on that plot. This is mandatory.
- You can take tax benefits on composite loans too, as long as you complete construction within 3 years.
- Under composite loan, you can get a loan for up to 80% of your estimated cost. That means, when you submit the cost of land and construction to the bank, they will fund up to 80% of that value.
- NRIs can apply for a composite loan just like resident citizens. The process to apply and disbursement are all similar for an NRI and a resident Indian.
- When you take a regular home loan, the amount is disbursed to the builder’s account directly. A composite loan is different. Bank will disburse the land loan amount and the construction amount – both to your personal account.
WRITTEN BY: SOHAM MEHTA
