A Loan Against Property is a type of secured loan and can be sanctioned against a non-residential or commercial property as well. Buying a property is a dream come true for most people, and it often comes with a hefty price tag. However, if you are a property owner, you can leverage your commercial asset by availing a loan against the same. A loan against commercial property is usually taken against a property which is in the name of the borrower. This comprehensive guide explains everything you need about Loan Against Commercial Property.
About Loan Against Commercial Property
A commercial property loan allows you to borrow funds by keeping your property as collateral. The property could be commercial or non-residential. The amount sanctioned against it is a percentage of the property’s current market value. The maximum amount you are allowed to borrow would be 70% of the purchase price of the property.
Age Requirement for Loan Against Commercial Property
Certain age requirements need to be met to avail this type of loan.
| Salaried Employees/Self-Employed Professionals/Non-Professionals | Partnership Firms/Corporate Bodies |
| The individual should not be more than 50 years when applying for the loan. | The entity has to be in existence for at least three years before the date of application. |
Documents Required for Loan Against Commercial Property
The list of documents required may vary from lender to lender, but some of the essential documents that need to be submitted are as follows:
Common Documents
- Application Form and Photograph
- Age and address proof (documents such as an Aadhaar card, driving license, PAN card, passport, or voter ID)
- Education qualification proof
- Processing fee cheque
- Photocopy of title documents, approved plan, etc.
Others
| Salaried Employees | Self-Employed/Professionals |
| Three months’ salary slips | Business continuity proof such as business registration certificates, GST returns, and audit reports |
| Past two years’ Form 16 | Past three years IT returns (business and self) with P&L Account and Balance Sheets audited by a CA |
| Past six months’ bank statements (salary account) | Past 12 months’ bank statements (self and business) |
Commercial Property Loan Interest Rates and Fees
Lenders usually offer lower interest rates than unsecured loans for commercial property loans. The rates can range from 8.99% to 11.5%, depending on the lender, loan amount, and factors like your credit score.
In addition to the interest rate, lenders may also charge a processing fee, prepayment charges, foreclosure charges, and additional fees, which can vary from lender to lender.
Benefits of Loan against Commercial Property
Here are some benefits of availing a commercial property loan:
- Lower interest rates: As the loan is secured against a property, the commercial property loan interest rates are generally lower than unsecured loans like personal loans or credit cards.
- High loan amount: The loan amount against commercial property is generally higher than unsecured loans. The loan amount can be as high based on the property value.
- Flexible repayment tenure: A loan against commercial property comes with flexible repayment options. The repayment tenure for such loans is generally longer than for unsecured loans, making EMI payments affordable.
- Quick disbursal: As the loan is secured against a property, the loan approval process is faster, and the loan disbursal is quick.
- Multiple end-use options: The loan against commercial property can be used for various business purposes such as business expansion, buying new equipment or machinery, working capital, debt consolidation, etc.
- Tax benefits: The interest paid on loan against commercial property is tax-deductible under the Income Tax Act, which reduces the borrower’s tax liability.
- Build credit score: Taking a commercial property loan and paying it off on time can help build a good credit score, which can help avail of credit in the future.
Conclusion
A loan against commercial property is a secured loan that offers several benefits and doesn’t bind the borrower with any end-use purpose. Commercial property such as a warehouse or factory can be used for this loan.
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