Loan Against Property FAQs

Introduction

Loan Against Property is a type of loan where businesses or corporates keep a property as a mortgage with the financial institution and 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. Here are the most frequently asked questions about Loan Against Property: 

 

Can we get a loan on property?

Yes, we can get a loan on the property. 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 is basically kept as collateral with the financial institution. When taking a loan, gaining the trust and the confidence of the lender is essential. So, mortgaging your property is a reliable option. 

How much can you borrow against property?

Loan against property is a loan taken from financial institutions by keeping the property as collateral. How much one you can borrow against property differs from one financial institution to another. In few of the cases, the exposure of loan amount may exceed the 100% of market value of the property. The payments for the loan may be spread out over a maximum tenure of 20  years.

What are the Benefits of Loan Against Property?

  • Lower Rate of Interest
    The rate of interest for a LAP Loan is considerably lower. It is because the financial institutions are lowering their risk by taking a mortgage from you. The rate of interest of LAP will be around MCLR + 1% (or maybe lower in a few cases). The rate of interest will vary depending on the profile of the borrower. 
  • Tenure of the Loan
    Loan Against property is provided for a longer period of time as compared to other loans. The longer the tenure of 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. 
  • Low EMI
    There is an inverse relationship between the tenure of the loan and EMI. Generally, longer the tenure, lower will be the EMI. As LAP is offered for a longer period of time, the EMI is comparatively lower than for other loans. 
  • 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. 
  • No Limit On Loan Amount
    There are always limitations while raising the amount in unsecured form. However, under secured one as long as the financials of the company and the mortgaged offered support, the borrower can get any amount in debt form. There are 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 definitely worked out. 
  • Loan Prepayment
    Generally loans are taken with the intention to expand the business or to face the tough financial conditions of the business. However, once the tuff time is over or the targeted project turned into good cash flow, anytime promoters can repay the loan amount and can even minimise the debt burden.

What are the documents required for Loan Against Property?

Documents Required for Public Limited & Private Limited Companies

  • 3 Years income tax returns, Balance-sheet, Audit Report of the Company
  • Company Pan Card, 1 Year All Current Account Banking shown in Balance Sheet Till date
  • All Directors KYC and 5 Photos
  • Shopact, Office Telephone, and Electricity Bill Latest, MOA, AOA
  • Companies All Loan Sanction letters, Cash Credit sanction letter, Closer letters if exist
  • All directors residence telephone and electricity bill latest
  • Shareholding pattern on the letterhead of company attested by CA
  • Company Profile
  • GST returns till date

Documents List for a Proprietorship Firm

  • 3 years Income Tax returns, Balance sheet, Audit Report
  • Pan Card, 1 Year All Current Account Banking shown in Balance Sheet Till date
  • Proprietor KYC and 5 Photos
  • All Loan Sanction Letters and Closer letters, Track Record, CC Sanction Letter if exist
  • SHop-act, GST Certificate, Office And latest Residence Telephone and Electricity Bill
  • GST returns till date
  • Company Profile

Documents List for a Partnership Firm

  • 3 Years income tax returns, Balance-sheet, 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
  • Shopact, Office Telephone, and Electricity Bill Latest.
  • Firm All Loan Sanction letters, Cash Credit sanction letter, Closer letters if exist
  • All Partners residence telephone and electricity bill latest
  • Shareholding pattern on the letterhead of company attested by CA (As on date)
  • Company Profile
  • Partnership Deed
  • GST Certificate & returns till date

In case the property offered is a Flat, Shop or, constructed own house you will require the following documents:

  • 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 it any executed of the property under reference
  • Share 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
  • Latest electricity bill of the property under reference

In case the property is an open plot, you will require the following documents:

  • 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 

We at Terkar Capital, understand the value of your hard-earned property. And we also understand the requirement, urgency of the funds required for your business. We are experts in corporate lending. We 1st analyze the case, understand the expectation of the client and put the best resources in place to achieve the desired outcome for the client. 

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