It is easier to avail of a home loan for residential property as compared to a commercial property loan as residential property loans are more extensively provided by banks and financial institutions. A commercial property loan is a secured loan obtained against any commercial property that you own.
In simpler words, these types of loans allow you to secure required funds by mortgaging your commercial property. The funds thus received come with zero end-use restrictions and can be used to buy new machinery, upgrade existing ones, etc.
If you own commercial property, you can avail of as much as 60% of the property’s value as a loan for up to 15 years. Here we shall look into all aspects of a commercial property loan in India.
How Loan on Commercial Property Works
Let us look at some of the important factors to be kept in mind to understand how a loan on commercial property works.
Collateral: If you want to avail of a commercial property loan, you must own commercial property, which you can mortgage. This can be an office building, a grocery shop, a manufacturing shop, and so on.
Loan Amount: Here the LTV or the loan-to-value ratio will help you calculate how much funding you can obtain. So, if your property is worth Rs.1 Crore and the LTV stands at 50%, then you will receive Rs.50 Lakhs. Commercial property loans provide lower LTV rates as compared to loans on residential properties.
Repayment: When it comes to repayment, the tenor on commercial loans is usually longer (around 15-18 years).
Factors That Affect Commercial Property Loan Eligibility
Although the commercial loan eligibility criteria vary from lender to lender, there are some common prerequisites just like loan against property eligibility that most financial institutions follow. They are as follows:
- Applicant’s Age: The applicant, whether salaried or self-employed, must be between 25 and 70 years of age. At the time of loan tenor completion, the borrower must fall within this age bracket. The age requirements vary from lender to lender, so it’s best to check with your lender.
- Income: Both salaried and self-employed borrowers must be able to show a stable source of income to be eligible for this type of financial assistance.
- Citizenship: The loan applicant must be an Indian resident.
The borrowers must check the above-mentioned eligibility parameters and confirm that they meet them. Failure to meet the criteria and below-mentioned points can result in the rejection of a loan application. That apart, lenders also check for the following:
- The builder must have a strong background and profile with a sound track record.
- The title deed of the commercial property must be verified. It must comply with all official regulations and civic approvals.
- Ascertain the actual value of the commercial property before applying for the loan. This will help you get the right loan value for your property.
- A good financial record with a high credit score, sufficient monthly income, and other credentils is must.
- The property age should match the criteria set by the bank.
- Your commercial property should have the minimum space criteria as mentioned by the lender
- There should be no discrepancy in the specifications of the commercial property.
How to Apply for a Commercial Loan
We all know how to apply for loan against property, but what about a commercial property loan application process? Here are the steps to be followed.
- Step 1: Visit the lenders’ website and look for the loan application section.
- Step 2: Enter the required details, such as your name, employment type, mobile number, and email id.
- Step 3: Next, enter details regarding your income and finances.
- Step 4: Press the submit application button
Once this is done, a representative from the bank will get in touch with you, to process and approve your commercial property loan application.
Benefits of Opting for a Commercial Property Loan
- Larger Loan Amount: If you opt for a commercial property loan in India, you can get a loan of up to 60% of the value of the property, or up to Rs.5 Crore. The funds received will greatly help you in fulfilling needs related to your business.
- Lucrative Interest Rates: This type of loan comes with lucrative rates of interest. However, loan against property balance transfer can also help in case you feel the lap interest rates are higher still.
- Easy Application Process: Commercial property loans also come with no end-usage restrictions, with the process of availing such loans being transparent, straightforward, and easy.
- Customized Solution: Given that every business has its own unique needs and requirements, these loans are specifically designed to meet the needs of every kind of business.
Summing Up
A commercial property loan is a suitable financing option for applicants during their financial needs. With its high amount of credit along with lower interest rates and a flexible long loan tenor, this type of financial assistance is good for business expansion and various other business-related purposes.
Further, a commercial property loan can be availed of by anyone having a commercial property. However, one must keep in mind the eligibility criteria before applying for such a loan, or their application might get rejected.