A secured loan obtained against any commercial property you own is referred to as a “commercial property loan,” and it enables you to obtain significant funding by mortgaging your commercial property. This method of mortgaging provides you with ample financing if you want to expand your business, whether it be by purchasing additional machinery, upgrading existing machinery, or purchasing new plants. If you own commercial property, you may be eligible for a loan for up to 60% of the property’s value with a maximum 15-year term.
Advantages of commercial property loans
Following is a description of the advantages of obtaining a commercial property loan:
- Larger Loan Amount: If you choose a commercial property loan in India, you can get up to Rs. 5 crores, or 60% of the property’s value. This substantial sum of money will greatly assist you in meeting the needs of your business.
- Lucrative Interest Rates: Because the loan is secured by a mortgage on your commercial property, you can get interest rates as low as 9%.
- Seamless Process and Easier Terms: Commercial property loans have no end-use restrictions, and the process of obtaining them is transparent, seamless, and quick.
- Custom Loan Solution: These loans are made to meet the particular needs of each business at hand because each has different requirements and needs of its own.
Interest Rate on Commercial Property Loans
The following fees and charges will apply to your loan if you choose to borrow money for a commercial property:
|
Applicant Category |
Effective Rate of Interest (per annum) |
|
Salaried/Self-Employed |
9% p.a. onwards |
The charges applicable on your loan are as elucidated below:
|
Fee Category |
Applicable Charges |
|
Processing Fee |
Up to 0.35% of the loan amount |
|
Foreclosure Charges |
4% of outstanding loan amount + GST |
The Pre-payment and foreclosure charges for individuals are as listed below:
|
Individual |
Flexi Loan |
Term Loan |
|
Time Period |
>1-year |
> 1-year |
|
Foreclosure Fees |
NIL |
NIL |
|
Part Payment Fees |
NIL |
NIL |
The Pre-payment and foreclosure charges for non-individuals are as listed below:
|
Non-Individual |
Term Loan |
Flexi Loan |
|
Time Period |
>1-year |
> 1-year |
|
Foreclosure Fees |
4% on the outstanding principal |
4% on the sanctioned amount during the Flexi Interest Only Loan Repayment Tenure and 4% on the available Flexi Loan Limit during the Flexi Term Loan Tenure |
|
Part Payment Fees |
2% on the Part Payment Amount |
NIL |
What’s the Process for a Commercial Property Loan?
You must first comprehend the process before choosing a commercial property loan in India. The following three factors must be considered:
- Collateral: Before you can choose to take out a loan for commercial property, you must first own commercial property that is mortgageable. This can be in the form of a grocery shop, office building, manufacturing shop, and so on.
- Loan Amount: In this case, the loan-to-value, or the LTV, will help determine how much funding you can obtain. Loan Amount: The loan-to-value, or LTV, will help determine how much funding you can obtain in this case. You will receive Rs. 50 lakhs if your property is valued at Rs. 1 crore and the LTV is set at 50%. Loans for commercial property have lower LTV rates than loans for residential properties.
- Repayment: When it comes to repayment, the tenure on commercial loans is usually longer; as long as 18 years. You can use a Loan Against Property EMI Calculator to estimate the interest rates and make an informed decision about your loan.
Eligibility for Commercial Property Loans
The following criteria have been established in order to qualify for a loan for commercial property:
|
Particulars |
Salaried |
Self-Employed |
|
Residency |
It is necessary to be a citizen and resident of India, and a property owner in Delhi NCR, Mumbai and MMR, Chennai, Hyderabad, Bangalore, Pune, or Ahmedabad. |
It is necessary to be a citizen and resident of India, and a property owner in Delhi NCR, Mumbai and MMR, Chennai, Hyderabad, Bangalore, Pune, or Ahmedabad. |
|
Age |
28 – 58 years |
25 – 70 years |
|
Employment Status |
Employed in the public, private or MNC sector. |
Should have a consistent source of income. |
|
Income |
Prices range from Rs. 25,000 to Rs. 35,000 depending on location. |
ranges from Rs 25,000 to Rs 35,000 depending on the city. |
|
Experience |
more than 3 years of experience. |
Experience of more than 5 years. |
Commercial Property Loan Documents
You must have the following documents in order to apply for a loan for commercial property:
-
- Proof of Income: a PAN card, an Aadhaar card, a passport, a voter identification card, or a driving license.
- Proof of Address: Aadhaar card, Voter ID, Passport, Ration card, and Utility bills.
- Property Documents: Title documents as well as other ownership and mortgage-related papers.
- PAN details or Form 60.
Salaried and self-employed parties must present the following documents as proof of employment and income:
|
Documents |
Salaried |
Self-Employed |
|
Proof of Employment |
Employer-issued identity card |
Business registration certificate, partnership agreement and so on |
|
Proof of Income |
Income Tax Return for the last year |
Income Tax Return for the last 2 years |
|
Last 2 month’s salary slips |
Balance Sheet and Profit and Loss statements |
|
|
Last 3 month’s bank account statements |
Last 6 month’s bank account statements |
Commercial Property Loan EMI
Once the loan for commercial property is disbursed, it typically has a term of 15 years and a monthly interest payment. Depending on a number of variables, including market value, mortgage, credit history, ability to generate income, and the availability of documents, interest rates for loans against commercial properties range from 9% to 24%. Use an EMI calculator for commercial property loans once your interest rate has been determined to help you better plan your payments.
How to Apply for Commercial Property Loan?
To apply for a commercial property loan in India, you must complete the procedures outlined below:
- Step 1: Go to the lender’s website and look for the application section.
- Step 2: Fill out the form with your name, employment type, phone number, and email address.
- Step 3: Next, enter information about your income and finances.
- Step 4: Submit the application form online.
Once you have done so, a lending agency representative will contact you to process and approve your commercial property loan application.
Differences Between Funding Residential and Commercial Property
The following are the distinctions between funding residential and commercial property:
|
Funding Residential |
Commercial Property |
|
Typically made to individual borrowers. |
Typically made to business entities. |
|
This type of mortgage has a fixed rate and a 30-year repayment period. |
The duration ranges from less than 5 years to 20 years, with a variable rate of amortisation. |
|
A high loan-to-value ratio, or even 100% in some cases. |
Loan-to-value ratio for commercial real estate loans ranges from 65% to 80%. |
Considerations Before Applying for a Commercial Loan
Make sure you are aware of the following important factors before applying for a commercial property loan in India:
- Run a background check on the builder if, by chance, you are requesting a commercial real estate loan for a project that is still under construction. Your loan may be turned down if the lender discovers any inconsistencies in the builder’s records.
- Make sure the builder has all the necessary approvals for the construction before proceeding.
- Make sure to have the property assessed by a professional to avoid paying a higher sum.
Disclaimer: Access to the content on this internet page is provided by iPropUnited as a courtesy to the public service for educational reasons based on related news and stories. The accuracy of any information on this website cannot be guaranteed, however, it is all believed to be credible.
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