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How to Apply for Loan Against Property

    A loan Against Property is a type of loan that uses your commercial or residential property as collateral. Loans Against Property are customarily used as a quick means of financing by an SME to expand its business.

    The loan amount is derived as a percentage of the market value of the property being offered as collateral.  For loans against property in India, this percentage ranges from 50%-60%, depending on the bank and the nature and condition of the collateral.

    For example, if your property is worth Rs. 10 lakh in the market, then a bank may issue a loan against the commercial property at an amount between Rs. 5 and 7 lakh depending on factors associated with repayment ability.

    A loan against Property is often taken in the form of a term loan (repaid through EMIs) or through an overdraft line of credit.

    A loan against property generally has the potential to be of a larger ticket size relative to other SME loans.  Up to Rs. 25 crores can be disbursed for a loan against property, depending on the bank, location, and value of the property being mortgaged.

    Under RBI regulation, banks are required to dedicate a percentage of all business funding to the priority sector, which is mainly composed of rural businesses involved in agriculture. For SMEs that are categorized under the priority sector, loans against property can be taken as loans against agricultural land.

    What are the Benefits of Loan Against Property

    • Lower interest rates compared to personal loans
    • The longer tenor of the loan, making the repayment process easier for businesses
    • Easy documentation
    • Quick approval and processing

    Loan Against Property Interest Rates and Tenor

    • The interest rates for the loan against property commonly range from 12%-15%.
    • A loan against a property usually has a maximum tenor of 15 years.

    Loan Against Property Eligibility Criteria

    To be eligible for loans against property, applicants must be

    • Indian Residents
    • Salaried, Self-Employed or Government Employed individuals
    • At least 25 years of age but not more than 65 years
    • Earning at least Rs. 3,00,000 – 5,00,000 of net income

    The type of property accepted as collateral in a loan against property varies from one bank to another. Banks accept at least one of the following:

    • Self-occupied commercial property
    • Rented commercial property
    • Vacant commercial property
    • Self-occupied residential property
    • Rented residential property
    • Vacant residential property

    Loan Against Property Document Checklist

    Document Entity
    Sole Proprietorship Private Limited Company Partnership
    Individual Director Partner
    PROPERTY PAPERS
    Latest Sale Agreement & Previous Chain of Titles with Sanctioned MAP
    Layout Plan
    Occupancy Certificate
    Share Certificate
    INDIVIDUAL
    Age & ID proof (any of the below):

    • PAN Card
    • Passport
    • Drivers License
    • Aadhar Card
    Residence/Office Ownership (any of the below):

    • Electricity Bill
    • Sales Deed copy
    Address Proof (any of the below):

    • Passport
    • LIC Premium (not over two months old)
    • Utility Bill (not over two months old)
    • Arms License (not over two months old)
    • Mobile Bill (not over two months old)
    Last 12 months Bank Statement
    IT returns of last 3 Years
    Photograph with Signature
    Any other loan statements on books of owners/partners/director along with Sanction Letter.
    COMPANY
    Business continuity proof – 3 years income tax return & income  statement
    Last 2 year audit report and audited financials (must include debtors & creditors list)
    Last 12 months bank statements
    In the case of transfer of a loan: Last 12 months of  loans statement  along with the Sanction Letter of your previous bank
    Any other loan statements on books of companies along with Sanction Letters
    Last 12 months loans statement with Sanction Letter of any other existing loans
    Business incorporation date proof – PAN Card
    MOA(Memorandum of Association ) and AOA (Articles of Association)
    Latest share holding pattern on company letterhead
    List of current Directors on company letterhead
    Certificate of Incorporation
    Partnership Deed
    Certificate of Registration