Loans Against Property (LAP)
A loan against property is a loan granted against the mortgage of any type of property. Be it residential, commercial, or industrial property. In this, the borrower should declare the end use of the loan in the application form. The Loans Against Property in India are basically kept as collateral with the lender.
When taking a loan, gaining the trust and confidence of the lender is essential. So, mortgaging your property is a reliable option. When you mortgage your property with the lender, they will have better confidence in your business. When lenders trust your business, it is easier for us to compromise and reduce the rate of interest. This is one of the reasons why ROI for a LAP is cheaper compared to any other type of loan.
Benefits of Loan Against Property
1. Lower Rate of Interest
LAP interest rates are lower because institutions mitigate risk by taking mortgages. ROI varies based on the borrower’s profile. IT will be around MCLR + 1% (or maybe lower in a few cases).
*Interest varies depending on the profile of the borrower.
2. Tenure of the Loan
As compared to other loans, a Loan Against property is provided for a longer period. The longer the tenure of the loan, the smaller will be the EMI. In LAP, the tenure may go up to 20 years. This will help the business to take the funds from a long-term perspective.
3. Low EMI
There is an inverse relationship between the tenure of the loan and EMI. Generally, the longer the tenure, the lower will be the EMI. As LAP has offered for a longer period, the EMI is comparatively lower than for other loans.
4. Many Financial Products offered
The borrower can use the property to mortgage and can avail of many lines of products. Right from project funding, a term loan to a working capital arrangement. Once the financial institution minimizes the risk with some kind of security, there will be many permutations and combinations set.
5. No Limit On Loan Amount
There are always limitations while raising the amount in an unsecured form. However, under a secured one as long as the financials of the company and the mortgaged offered support, the borrower can get any amount in debt form, with no restrictions on it. There are some sets of solutions that need to be arranged while raising the higher amount, but yes that can be worked out.
6. Loan Prepayment
Generally, loans are taken to expand the business or face the tough financial conditions of the business. However, once the tough time is over or the targeted project turns into good cash flow, promoters can repay the loan amount and can even minimize the debt burden.
Eligibility for Loans Against Property in India
1. Age Factor
An individual should be a minimum of 21 years of age and a maximum until 65 years of age in order to secure a loan against property. Some banks also consider a minimum age of 18 years and a maximum of 70 years.
2. Loan To Value Ratio
Banks typically look for an LTV ratio of 60% to 70% while dealing with loans against property. This ratio varies from one type of property to another. It is highest for loans taken against residential properties but the lowest for loans against commercial properties.
3. CIBIL Score
CIBIL stands for Credit Information Bureau India Limited. Banks and financial institutions give loans against property based on the market value or the registered value of the property. In case you have a low CIBIL Score, some financial institutions may give loans against property with a higher rate of interest or a higher margin.
4. The Tenure of the Loan
The tenure for which a bank gives Loans against property in India varies from bank to bank. Generally, banks give loans for 15 years against the property. But there are some banks that give loans against property for 7 to 9 years.
Learn more about the LAP execution process, Here.
Procedure for loan against property
Every bank has a different set of processes for LAP Facilities. Here are some fundamental steps which usually every financial institution follows:
1. Check if you are eligible and calculate the EMI
We have mentioned some basic eligibility criteria above and there are specific eligibility criteria for each bank. Check the criteria and see if you are eligible for the loan. Calculate the approximate EMI that you would have to pay.
2. Property and legal documents
The property against which you are taking a loan should have all the documents clean and ready. Some common documents asked for by financial institutions are Registered Sale Deeds, Past Sale Deeds Chain, the Latest House Tax Return, Approved Building Plans from Municipal Corporations, and so on.
3. Explore Loan against property interest rate offers
After checking the documents, you can now research the interest rates and the different options available. There are usually fixed and floating rates. Fixed ones are generally a bit higher than floating ones.
4. Compare miscellaneous charges and loan parameters of the banks
Financial institutions charge various additional fees in addition to the interest rate. Be aware of all their extra fees like processing charges, prepayment charges, and so on and so forth. We at Terkar Capital can help you with this entire procedure.
5. Other parameters
While finalizing the financial institution or bank do check the other factors involved like the turnaround time of the banks, quick loan delivery, transparency, and other parameters. Try to read reviews of existing and past bank customers in order to help you decide.
Evaluate your property with Terkar Capital
At Terkar Capital, we understand that navigating the world of finance can be overwhelming, especially when it comes to securing loans against property in India. That’s why we strive to make the lending process as transparent and personalized as possible.
Our expert team work tirelessly to understand your unique financial needs and provide customized solutions that work for you. We prioritize fairness and always ensure that our clients receive a justified valuation of their property, which helps them get the best possible rates. We take pride in our reputation for providing lightning-fast turnaround times, allowing you to get the funds you need. And with the best interest rates in the industry, we ensure that you get the most competitive deals.
Documents required to apply for Loans Against Property in India
A. Public Limited & Private Limited Companies
- 3 years of income tax returns, Balance-sheet, and Audit Report of the Company
- Company Pan Card, 1 Year
- All Current Account Banking shown in the Balance Sheet to date
All Directors KYC and 5 Photos - Shop Act, Office Telephone, and Electricity Bill Latest, MOA, AOA
- Companies All Loan Sanction letters, Cash Credit sanction letters, and Closer letters if they exist
- All director’s residence telephone and electricity bill latest
- Shareholding pattern on the letterhead of the company attested by CA
- Company Profile
- GST returns to date
B. Proprietorship Firm
- 3 Years of Income Tax returns, Balance sheet, Audit Report
- Pan Card, 1 Year All Current Account Banking showed in Balance Sheet Till date
- Proprietor KYC and 5 Photos
- All Loan Sanction Letters and Closer letters, Track Records, and CC Sanction Letters if exist
- Shop-act, GST Certificate, Office, And latest Residence Telephone and Electricity Bill
- GST returns to date
- Company Profile
C. Partnership Firm
- 3 years of income tax returns, Balance-sheet, and Audit Report of the Company,
- Firm Pan Card, 1 Year All Current Account Banking shown in Balance Sheet Till date
- All Partners KYC and 5 Photos
- Shop Act, Office Telephone, and Electricity Bill Latest.
- Firm All Loan Sanction letters, Cash Credit sanction letters, and Closer letters if they exist
- All Partners residence telephone and electricity bills latest
- Shareholding pattern on the letterhead of the company attested by CA (As of date)
- Company Profile
- Partnership Deed
- GST Certificate & returns to date
D. In case the property offered is a Flat, Shop or, constructed own house
- Sale deed/deed of Apartment/Deed of Assignment
- Sanctioned layout plan/plan of construction of the building or apartment
- Property card/7/12 extract, Fer-far nond vahi/akhiv patrika of the property under reference
- Commencement certificate of the building/apartment
- Latest tax receipt of the property under reference
- Non-agricultural order issued by the appropriate authority
- Deed of Declaration of the building
- A general power of attorney in case the transaction has been carried out as a power of attorney holder
- Development agreement if any executed of the property under reference
- Share a certificate regarding the membership if any society is established for the said building/ apartment
- Possession certificate of the flat/shop
- Building completion certificate
- Four corners photographs of the property under reference
- The latest electricity bill of the property is under reference
E. In case the property is an open plot
- Sale deed
- Sanctioned map of the payout/plot under reference
- Latest 7/12 extracts of the property under reference
- Gaon Namuna-8A of the property under reference
- Non Agricultural order issued by the appropriate authority
- A general power of Attorney in case the transaction has been carried out as a power of attorney holder
- Four corners photographs of the property under reference
- Latest cess Tax receipt of the property under reference
Loan Against Property FAQs
1. How to get Property Loan?
A Loan Against Property is a type of loan where businesses or corporations keep a property. It is kept as a mortgage with the financial institution to get a loan against it. When you keep a property mortgage, the financial institution will trust you better. It is then easier to negotiate the terms and conditions of the loan with the bank and you may even get a lower interest rate.
2. Can we get a loan against industrail property?
Yes, we can get a loan on the industrail property. A loan against property is a loan granted against the mortgage of any type of property such as residential, commercial, or industrial property. The borrower should declare the end use of the loan in the application form. The property was basically kept as collateral with the financial institution. When taking a loan, gaining the trust and confidence of the lender is essential. So, mortgaging your property is a reliable option.
3. How much can you borrow against the property?
A loan against property is a loan taken from financial institutions by keeping the property as collateral. How much one can borrow against property differs from one financial institution to another. In a few cases, the exposure of the loan amount may exceed 100% of the market value of the property. The payments for the loan may be spread out over a maximum tenure of 20 years.
4. What is LTV Ratio?
LTV ratio is the ratio of a loan to the value of an asset purchased.
