Plot or Apartment in Bangalore: Loan, Legal Checks, Tax and Running Cost
A plot and an apartment at the same price are very different purchases. They differ in how a bank funds them, the taxes at purchase, the legal papers to verify, the cost of holding them and the ease of selling later. This guide compares the two on each of these points for a buyer in Bangalore.
What the Buyer Owns
A plot buyer owns a defined piece of land with its own boundaries and its own khata. The owner decides when to build, what to build within the building rules, and when to rebuild. Only the roads, parks and services of the layout are shared.
An apartment buyer owns the flat and an undivided share of the project land, held jointly with every other owner. The building, lifts, clubhouse and open areas are common property run by the owners' association. The home is ready to live in or to rent, but changes to the structure are limited.
Bank Funding and Cash at the Start
Banks lend more freely on an apartment. A home loan covers 75% to 90% of the value, depending on the loan size, and runs for up to 30 years. A loan on a plot commonly covers 70% to 80% of the value and often runs for 10 to 15 years, at a rate that may be a little higher.
The plot therefore needs more cash at the start and a higher EMI for each lakh borrowed. A buyer who wants a house on the plot also needs money to build it, through savings or a second loan. A composite loan covers the land and the building together, with a deadline for construction. Our EMI calculator shows the EMI and the upfront cash at any price.
Taxes and Charges at Purchase
Stamp duty and the registration fee apply to both. In Karnataka, a property above Rs. 45 Lakhs carries stamp duty of 5.6% with cess and surcharge, plus a registration fee of 2%. Duty is charged on the higher of the sale price and the guidance value.
GST is where the two differ. An under-construction apartment carries GST, usually 5% of the price, while a flat sold after its occupancy certificate carries none. The sale of a plot is a sale of land and is outside GST. The apartment price also brings items a plot does not have, such as car parking, clubhouse charges and a maintenance deposit.
Income Tax on the Loan
The tax deductions on a housing loan apply to a house. An apartment owner in the old tax regime deducts interest up to Rs. 2 Lakhs a year on a self-occupied home, from the year of possession. Principal repaid counts within the Rs. 1.5 Lakhs limit shared with other eligible payments.
A loan on vacant land earns neither deduction. The deductions begin only from the year a house is completed on the plot. A borrower in the new tax regime, which is the default, gets no deduction on a self-occupied home of either kind. For such a borrower, tax plays no part in the choice.
Legal Checks Compared
Both purchases need a lawyer's review, but the papers are different. The table lists the main checks for each.
| Check | Plot | Apartment |
|---|---|---|
| Title | Chain of deeds for the land and an encumbrance certificate | Title to the project land and the builder's right to develop it |
| Land use | Conversion order for residential use | Conversion order for the project land |
| Approval | Layout plan approved by the planning authority, such as the BDA or the BMRDA | Sanctioned building plan and commencement certificate |
| RERA | Registration of the layout | Registration of the project or phase |
| Completion | Release of sites by the authority and formed roads and services | Occupancy certificate |
| Khata | Khata for the individual site | Khata for the flat after registration |
| On the ground | Survey of boundaries, and distance from lakes and storm water drains | Construction quality, and the area and parking as agreed |
A layout larger than 500 sq m or with more than eight plots must be registered with Karnataka RERA before sale. The same rule applies to apartment projects. A registered project gives the buyer a regulator to approach if the promoter delays or defaults.
Title risk is higher on plots. Revenue sites, layouts without approval and land sold twice are found mostly in plotted sales on the city's edges. An apartment in a registered project from an established builder carries less title risk and more risk of delay and of quality.
Cost of Holding
A vacant plot costs little to hold. The owner pays property tax on vacant land and, in a gated layout, a maintenance charge to the developer or the association. The plot needs a compound wall or fencing and a visit now and then, since vacant land invites dumping and encroachment.
An apartment costs more each month. The owner pays maintenance to the association, property tax, and repairs inside the flat. In return, the flat is usable from the first day, saving rent for an owner who moves in or earning rent when let out. A plot earns nothing until a house is built on it.
Value Over Time
Land does not wear out, and a plot's value moves with its location and the roads, metro lines and jobs that come near it. A building ages. An apartment's price reflects both the share of land and a structure that needs upkeep and, after some decades, redevelopment.
This difference favours a plot over a long period in a location that develops as hoped. It also carries more uncertainty, since a plot in an outer area depends on infrastructure that is still planned. An apartment in a built-up area such as Whitefield depends less on future projects, because the jobs and services already exist.
Selling Later
An apartment in a known project usually finds a buyer faster. Flats are the common form of housing in the city, prices of recent sales in the same project are easy to compare, and banks fund resale flats readily. The buyer's bank repeats the legal checks, which go quickly where the papers are in order.
A plot takes longer to sell where the area is still developing, and any gap in the papers slows it further. A site in an approved layout with a clean title and an individual khata sells far more easily than a revenue site. Approved layouts in corridors such as Devanahalli draw buyers who plan to build as well as investors.
Which Buyer Each One Suits
The choice follows the buyer's cash, timeline and willingness to manage a building project. An apartment generally suits a buyer in the situations below:
- The home is needed within a year or two
- Most of the price will come from a loan
- Security, amenities and shared upkeep matter to the family
- The owner may move cities and rent the home out
A plot generally suits a buyer in these situations:
- A larger share of the price is available in cash
- The family wishes to build a house to its own plan
- The land will be held for many years without a need for income from it
- The buyer is ready to verify the title and approvals in detail
Some buyers do both over time: an apartment to live in first, and a plot later as savings grow. Whichever comes first, the papers decide the quality of the purchase more than the type of property does.
