A practical guide to land acquisition funding in India: how private developers fund land purchases once banks step aside, what lenders charge, and what they take as security.
Main findings
Six points that shape every land acquisition funding deal. Select a card to jump to the detail.
Banks cannot fund a private builder’s land purchase
RBI allows bank finance for land acquisition only to public agencies, and only as part of a complete project.
See who lends → 2Non-bank capital fills the gap
Land is funded by NBFCs and housing finance companies, SEBI Category-II AIFs, private credit funds, family offices and HNIs.
See the lender types → 3Senior debt covers 40 to 55% of land value
Pricing starts at about 12% a year and above. Approved or converted land can reach 55 to 70% LTV.
Try the LTV view → 4Mezzanine costs more; equity takes profit
Mezzanine debt costs about 18 to 24%. Equity partners take a share of project profit instead of a fixed coupon.
Compare costs → 5Title quality decides how much can be raised
Security is a registered mortgage over the land, supported by promoter guarantees, a charge on the project SPV and sometimes a share pledge.
Explore the security stack → 6Land loans are short and repaid by refinancing
Tenures run 12 to 36 months, up to 4 years. Most are refinanced into a bank construction loan once RERA registration and approvals arrive.
Walk through the process →What is land acquisition funding?
Land acquisition funding is money raised to buy land before a project is established. It is used mainly by builders and developers, but also by landowners and investors.
Senior debt. The first-ranking loan against the land, secured by a registered mortgage. It usually covers 40 to 55% of land value, and up to 55 to 70% where the land has approvals.
Mezzanine debt. Sits behind senior debt and is priced higher, at about 18 to 24% a year, often with a share of profit as well.
Equity participation. There is no fixed coupon. The partner takes a share of project profit instead.
Which form a developer gets depends on the lender’s risk appetite.
Unlike home or construction loans, lenders judge land on its value, location, potential legal use, repayment plan and the developer’s history, rather than on cash flow, because there is usually no income at this stage.
This is the highest-risk phase of a project, often without essential approvals and registrations.
Why pricing is higher
RBI permits individual financing for plot purchases made with the intent to build. That is classified separately from developer funding.
Who lends in land acquisition funding
Why banks are out
The RBI Master Circular on Housing Finance prohibits scheduled commercial banks from providing any funding to private builders for land purchases, even if the land is part of a housing project. Funding is restricted to public agencies and can only occur when tied to complete projects that include essential infrastructure. Such loans must be term loans, completed within three years, and are limited to the acquisition price plus development costs, using current market prices for land valuation.
The circular directs bank credit towards production and construction rather than land speculation. Banks may lend to private builders on commercial terms for specific projects, but must ensure that no funds are used for purchasing land.
What banks may do and what other lenders may do are different. That gap is why a separate land acquisition funding market exists.
The takeawayWho fills the gap
Select a lender type to see its role.
Senior land loans. Not covered by the bank prohibition.
Structured debt and mezzanine, often on larger tickets.
Named among the sources of land acquisition funding, alongside NBFCs and private credit funds.
Smaller or faster deals, with flexible terms.
Not for private builders’ land. Banks enter later, through construction finance.
In land acquisition funding, these lenders prioritise land as collateral and decide faster than banks, though at higher risk-based pricing. Only a limited number of lenders focus on land-backed loans at any given time, and interest varies by location and quarter.
Bengaluru, Mumbai, NCR, Hyderabad, Pune and Chennai generally offer better loan-to-value ratios and interest rates, while land in tier-2 and tier-3 cities receives selective funding. Kolkata and other cities in East India are not typically highlighted as preferred markets.
Where cheaper capital sits: the completed-asset end
The IFC disclosure shows the other end of the real estate funding cycle. In December 2024, IFC invested in senior secured, listed non-convertible debentures issued by NDR InvIT Trust, a AAA-rated warehousing investment trust. The investment was disclosed as up to US$150 million, within a board approval of US$250 million, released in tranches.
NDR owns close to 17 million sq ft of warehousing across 33 parks, including Kolkata, leased on long-term contracts with fixed payments. The money can be used to repay existing debt or to buy completed warehouses.
The example is useful as a contrast. Development finance institutions and bond investors lend in size against built, leased, rated assets. Land has none of those features yet, which is why land acquisition funding comes from a narrower and costlier set of lenders.
How land acquisition funding is done
Both advisory sources describe a similar sequence. The order below combines them. Select a step, or use the buttons to move through.
Identify the land
Identify the land and collect the title papers, approval status and development potential (zoning, FSI, intended use).
Title diligence and valuation
Run title diligence and valuation. A clean, marketable title is the starting point for any sanction.
Approach lenders
Smaller deals usually go to a single lender. Deals of about ₹50 crore and above are often split across lenders or structured in layers.
Sanction
Approval takes about 3 to 6 weeks for clean titles. A strong sponsor with a clean title can close in 3 to 4 weeks. Complex titles, pending approvals or syndicated deals take about 6 to 10 weeks to disburse.
Security and disbursal
Create the security (mortgage, guarantees, pledges) and disburse.
Repay at exit
Repay through a planned exit within the loan term. See the exit routes below.
Documents lenders ask for
Tick off what you have ready. The list is a readiness check, not a lender’s form.
Land title
Record names differ from state to state.
Land use and approvals
Sponsor and structure
Exit
Repayment and exit in land acquisition funding
Land acquisition funding typically comes with short tenures, from 12 to 36 months and up to 48 months (4 years), although actual repayment periods may be shorter. Repayment is usually structured as a single bullet payment at the end of the tenure, or as interest-only payments with the principal repaid on exit. Lenders generally require a clearly defined exit strategy before sanctioning the loan.
The common routes are:
Refinance into a construction loan
Once RERA registration and approvals are in place.
Sell plots in phases
For plotted developments.
Sign a JDA with a builder
A joint development agreement.
Sell the land outright
At a higher value.
RBI regulations govern the refinance route. Banks can sanction real estate loans before all approvals are in place, but they can disburse funds only after the borrower obtains the required government clearances. As a result, land loans can bridge the funding gap until approvals are secured and bank construction finance becomes available.
Refinancing from land debt to bank construction finance may reduce the cost of capital from approximately 16% to 11%.
Why the exit mattersLand acquisition funding: ticket sizes and LTV norms
Land acquisition funding ticket sizes range from approximately ₹2 crore for smaller plot purchases to over ₹200 crore for townships and large integrated land parcels.
Raw, unapproved land is funded at 40 to 55% of land value.
How land compares with a home loan
RBI lets banks lend 75 to 90% of property value on individual home loans, depending on loan size. Land LTVs are much lower because the asset produces no income and its value depends on approvals that may not arrive.
What moves the LTV within these ranges
A clouded title is either marked down or declined.
At what cost: land acquisition funding rates
Land acquisition funding is priced for early-stage risk: no approvals, no sales, and a value that depends on future permissions. The all-in cost depends on tenor, LTV, location and how convincing the exit plan is.
The real cost is carry. Each extra year spent on land debt before refinancing adds noticeably to project cost, which is why both sources stress planning the exit from day one.
The carry costCarry cost calculator
An illustration only. At the defaults, ₹50 crore at 16% costs about ₹8 crore a year in interest, and the same amount at 11% costs about ₹5.5 crore. Change the inputs to test your own case.
Simple interest on the full loan, with no fees, no part repayments and no compounding. Processing fees, prepayment terms and other charges are not included. Confirm them with lenders before quoting an all-in figure.
Against what security
In land acquisition funding, the land is the only real asset at this stage, so lenders build a layered security package around it. Select a layer to see more.
Title is what gives the mortgage its value. A clear, marketable title backed by a title search report and encumbrance certificate supports a sensible LTV. A doubtful one reduces it or ends the deal. The exit plan works as a second line of comfort: lenders want a time-bound route to repayment agreed before they sanction.
For bank lending against land, RBI requires land taken as security to be valued at current market price only, by qualified independent valuers under a board-approved policy.
When the project later moves to bank construction finance, RBI also requires the developer to disclose in brochures and advertisements which bank holds the mortgage, and to provide the bank’s NOC for sales where needed.
Related reading from Leverest
Land acquisition funding: frequently asked questions
Short answers to the questions developers ask most.
No. RBI does not allow banks to give private builders any facility for buying land, even as part of a housing project. Banks can finance land only for public agencies. Individuals can get bank loans to buy a plot if they intend to build a house on it.
Land acquisition funding comes from NBFCs and housing finance companies, SEBI Category-II AIFs, private credit funds, family offices and HNIs.
Usually 40 to 55% of land value for raw land, and up to 55 to 70% where the land has approvals, a conversion order or an approved layout. Title, location and track record decide where in the range a deal lands.
Senior land debt is quoted at about 14 to 20% a year, and mezzanine at 18 to 24%. Equity partners take a share of profit instead of interest.
About 3 to 6 weeks for a clean title, and as little as 3 to 4 weeks with a strong sponsor. Complex titles, pending approvals or syndicated deals above ₹50 crore take about 6 to 10 weeks.
Mostly not. Lenders prefer converted (non-agricultural) land and fund agricultural land only when conversion is in process or approvals are clear.
Usually as a bullet or interest-only loan, repaid at exit by refinancing into a construction loan, selling plots, signing a JDA with a builder or selling the land.
There are no approvals, no RERA registration and no sales at the land stage, so lenders price for higher risk. Once approvals arrive, bank construction finance at about 11% can replace land debt at about 16%.