Loan Against Agricultural Land: A Detailed Guide
In India, farmers and landowners trying to meet their financial needs may find that taking out a loan secured by their agricultural property is a useful financial tool. With this kind of agricultural loan, people can use their agricultural land for a variety of purposes and realize its full potential value. In this blog post, we will examine how to get a loan secured by agricultural land in India, including the necessary procedures and considerations. After reading this post, you will have the answers to all your questions, including how to obtain a loan secured by agricultural land, how much you can borrow against agricultural land, interest rates on loans secured by agricultural land, and from where to obtain a loan secured by agricultural land.
Table of Contents
What is a Loan Against Agricultural Land?
One kind of mortgage loan provided against a farmer's or borrower's land is a loan against agricultural land. Generally speaking, the maximum loan amount equals the cost of the mortgaged land. A farmer or borrower may utilize this loan for several reasons, such as:
To satisfy the demands for investment, production, and consumption.
To cover costs associated with crop cultivation and equipment acquisition.
To handle individual requirements like marriage, healthcare, education, etc.
Since most banks and HFCs only accept residential and commercial properties, only a few providers offer loans secured by agricultural land. A common term for this type of product is Loan Against Property.
Different Forms of Loan Against Agricultural Land
Agricultural Term Loan: These loans are for short-term requirements like buying machinery, seeds, fertilizer, or other farm supplies.
Kisan Credit Card (KCC): This kind of loan is given to farmers to meet their farming requirements. Banks like SBI, HDFC, and Axis Bank issue it.
Agricultural Infrastructure Fund: The government provides this fund to offer financial assistance to the agricultural industry. Its goal is to lend money for infrastructure projects like processing plants, cold storage facilities, and storage sites.
Loan Against Warehouse Receipt: The warehouse receipts issued for the storage of agricultural products serve as collateral for this loan.
Benefits of Loan Against Agricultural Land
The following are some of the main advantages of taking out a loan secured by agricultural land:
Fast and simple access to funds: Loans secured by agricultural land are processed more quickly than other loan types, which can be laborious and involve a lot of paperwork. It is a fantastic choice for people who require quick access to cash because you can frequently receive your money in a few days.
Reduced interest rates: Since your land is collateral for the loan, lenders are more inclined to give you a lower interest rate than they would for an unsecured loan. In the course of the loan, this can save you substantial money.
Keep your land: If you take out a loan secured by agricultural land, you can keep and use it for investment or farming. Having control over your most valuable asset while still having access to the money you require is a huge benefit.
Flexibility: You can pay for necessary repairs or improvements, start or grow an agricultural business, or invest in real estate with a loan secured by agricultural land. Because of its adaptability, it's a fantastic choice for people with several financial objectives.
No effect on the current agricultural land agricultural land as collateral for a mortgage loan: If you already have a mortgage on your land, taking out a loan against it won't affect it. It implies you won't have to worry about losing your land.
Eligibility for Loan Against Agricultural Land
To be eligible to apply for a mortgage loan secured by agricultural land, you must meet the following requirements.
Forward-thinking, both literate and illiterate farmers, dairy proprietors, and horticulturists who possess documented occupation rights as owners, cultivators, or tenants.
The minimum age should be 21 years and the maximum age can be 65 years.
In addition, the provider considers many other factors, such as the applicant's income, liabilities, assets, etc., to assess a customer's eligibility.
Interest Rates & Processing Charges for Loan Against Agricultural Land
Since only a few providers offer loans secured by agricultural land, please consult the table below to view the interest rates for loans secured by property provided by the top providers.
Bank | Loan Against Property Interest Rate | Processing Fee |
Citibank | 8.53% onwards | 0.75% of the loan amount |
SBI | 9.35% onwards | 1.00% of the loan amount |
Kotak Bank | 9.50% onwards | 1.00% of the loan amount |
HDFC | 9.65% onwards | 0.25% of the loan amount |
IndusInd Bank | 9.95% onwards | 2.00% of the loan amount |
To check if a loan secured by agricultural land is available, connect with your preferred provider.
Documents to Apply for Loan Against Agricultural Land
Your KYC documents, proof of ownership of the agricultural land, bank statements, and evidence of income are all necessary for a loan secured by agricultural land. All the required paperwork is necessary when applying for a loan secured by agricultural land to guarantee a simple and easy process. A detailed list of all the documents you will require is listed as follows:
Application Form Completed: Start by completing the application form fully, as this forms the basis of your loan request.
Identity Confirmation: Please present a legitimate form of identification. It might be your passport, Aadhaar card, or PAN card. These records verify your identity to the lender.
Proof of Residence: You must provide proof of your residence with an ID. You can use your recent utility bills, passport, or Aadhaar card. The lender can confirm your permanent address with the help of these documents.
Documents about land ownership: The records of your agricultural property are crucial to this procedure. It comprises the property's utility bills, proof of land taxes paid, and the land registration document. These documents prove that you are the owner and the land qualifies for the loan.
No Dues Certificate: Present a No Dues Certificate from your neighborhood Co-operative Credit Society if required. This document reassures the lender that the land has no unpaid debts.
Copy of the Land Sale Agreement: A copy of the agreement might be necessary in certain situations. The history and transactions of the land are in this document.
Bank Statements: If the lender requests them, provide your most recent six months' bank statements. These statements provide information about your ability to repay debt and your financial health.
Images: Last but not least, passport-sized photos of the applicant and any co-applicants are typically needed. These images serve as documentation and verification tools.
Steps to Apply for a Loan Against Agricultural Land
If you are looking to apply for a loan against agricultural land, you will have to follow these steps:
Step 1: Qualifications for a Loan Secured by Agricultural Property
Have you ever wondered if we could borrow money on agricultural land? It is essential to comprehend the qualifying requirements established by the lending organizations before applying for a loan secured by agricultural land. These standards might differ slightly between banks or other financial organizations. Land ownership, land type (irrigated or non-irrigated), landholding size, and proof of income are typically considered eligibility factors. Before submitting the loan application, make sure you fulfill these requirements.
Step 2: Required Documents for Agricultural Land Loan Applications
You must collect the required paperwork before applying for a loan secured by agricultural property. Testifying of land ownership, such as a sale or title deed, revenue records, land tax receipts, proof of identity, proof of address, proof of income (such as income tax returns), and bank statements are some examples of the documentation process. These records aid the lending organization in assessing your loan application and help build your credibility.
Step 3: Making a loan application
Go to the closest branch of a bank or other financial organization that offers loans secured by agricultural property. Get the loan application and make sure you fill it out completely and accurately. Give the necessary information about the land, including its appraisal and the loan amount. Verify all the information one last time before applying.
Step 4: Agricultural Land Valuation
The lending organization will determine how much your agricultural land is worth after the submission of the loan application. The value of the land may be assessed by a registered valuer or by an internal valuer. The valuer will consider the area's fertility, location, ease of access to facilities, and comparable properties' market values. Your eligibility for a loan depends on the land valuation report.
Step 5: Loan approval secured by agricultural land
The lending organization will determine whether to approve your loan after examining your application, supporting documentation, and land valuation report. They will confirm your eligibility, creditworthiness, and whether the land you use as collateral is viable. Your loan application is accepted if you fit the institution's requirements and the land valuation with them.
Step 6: Disbursement of Loans
The lending organization will complete the loan agreement after the loan is approved. They will provide the required documentation, including the loan's terms and conditions. Depending on your preference, the loan amount will be deposited into your bank account or issued as a demand draft after the deal gets finalized.
Step 7: Payback of the Loan Secured by Farmland
Usually, there is a schedule for repaying the loan secured by agricultural land. You need to pay the principal amount plus interest in installments regularly. The loan agreement will specify the length of time and frequency of repayment. Respecting the repayment plan is crucial to avoiding fines or legal repercussions.
Conclusion
One excellent way to grow your farm or diversify your sources of income in India is to take out a loan secured by agricultural land. It's essential to assess the features, advantages, and qualifying requirements of all banks before the decision. It can be challenging to pick the option that best suits your needs because there are many choices.
FAQ
Q1. Can we get a loan on agricultural land?
Indeed, agricultural land is used as collateral for loans, contingent on the lender and an evaluation of the land's worth.
Q2. What is the repayment period for a loan against agricultural land?
A loan secured by agricultural land may have a 20-year repayment period, though this varies from bank to bank.
Q3. What documents are required to apply for a loan against agricultural land?
You must submit documentation of your income, proof of land ownership, and other financial records, like bank statements, to apply for a loan secured by agricultural land.
Q4. What are the benefits of a loan against agricultural land?
Taking out a loan secured by agricultural land has many advantages. Certain banks provide easy application procedures, speedy loan approvals, minimal processing costs, adjustable payback plans, and customized agricultural finance solutions.
Q5. How will I receive the loan amount?
The farmer or borrower may take out the money in installments when necessary.
Q6. Is it mandatory to have a co-applicant for availing of a loan against agricultural land?
A co-applicant for a loan secured by agricultural land is generally not vital. However, it is required to include all landowners as co-applicants if there is more than one.
Q7. What are the different additional charges applicable to a loan against agricultural land?
In addition to the processing fee, the loan may be subject to other fees
Charges for Property Insurance and Incidentals
Statutory and regulatory fees
Foreclosure fees
Prepayment fees
Conversion fees
Dishonour charges for checks
Penalty for late payments
Stamp Duty
Lawful Charges
Q8. How is the maximum loan amount calculated?
Typically, loan providers use the size of the mortgaged land to determine the loan amount. The applicant's maximum loan amount is equal to the value of the land.
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