A Guide to Loan Against Commercial Property in 2023

A loan against property (LAP) can be taken against both commercial and residential properties. It can help you finance major personal expenses like higher education, medical exigency, marriage and debt consolidation, and business-related expenses like working capital and business expansion. An LAP is different from a plot loan. A plot loan helps you finance the purchase of a plot of land. 

If you use a commercial property like an office or a factory as a security to apply for a loan, it would be called a loan against commercial property. Planning to apply for one in 2023? Read this guide carefully to learn about this kind of loan.

Features and Benefits of a Loan against Commercial Property

  • Big-Ticket Loans 

If you apply for an LAP from a renowned bank in India, you can borrow a large amount ranging from ₹ 5 lakhs to ₹ 10 crores. The amount is enough to fund a major business-related or personal expense. Even if your financial requirement is small, you can apply for a micro LAP. 

  • Loans for Everyone

A loan against commercial property can be availed by both self-employed individuals (like chartered accountants, lawyers, doctors, small business owners and traders) and salaried individuals (like government and corporate employees). Even if you have a land plot, a loan against a land purchase can be availed against it. 

  • Quick Loan Disbursal

A reputed lending bank disburses the loan quickly within 72 hours of receiving its application. Certain financial needs like debt consolidation, medical emergencies and marriage expenses can’t wait. Since you can get a loan against the commercial property so fast, it can help you finance your goal without much delay.  

Eligibility Criteria for a Loan against Commercial Property

This kind of loan comes with easy eligibility criteria. The following criteria are common for both salaried and self-employed applicants: 

  • You should be an Indian resident. 
  • You can add an immediate family member (who is earning) as a co-applicant to be eligible for a larger loan amount. If the co-applicant is a woman (such as your wife or mother), you can qualify for a lower rate of interest on the loan. 
  • You are eligible for both fixed and floating interest rates. 

Additionally, salaried individuals must be between 28 and 60 years of age when they avail a loan against commercial property. They must earn at least ₹7,000 every month. Self-employed individuals must be 28-70 years old when they apply for the loan. A co-applicant (salaried or self-employed) must be 18-65 years old. 

Documentation for a Loan against Commercial Property

Salaried and self-employed individuals and self-employed non-individuals must submit a filled and signed application and documents of the property to be used as collateral to apply for a loan against commercial property. 

Salaried individuals should additionally provide:

  • Identity and address proof like Voter ID card, PAN card, Aadhaar or Job card issued by NREGA 
  • Income proof like salary slips of the last 2 months, a 3-month bank statement and the latest Form 16 

Self-employed individuals must additionally submit: 

  • Identity and address proof (KYC) like Aadhaar, Voter ID card or PAN card 
  • Income proof like B/S (with schedules) and P&L accounts of the last 2 years, the latest 2 income returns and a 6-month bank statement 

Self-employed non-individuals should additionally  provide: 

  • Identity proof like the MOA or AOA of the company, a copy of GST registration or PAN Card  
  • Income proof like a 6-month bank statement, last 2 years’ B/S (with schedules) and P&L accounts and the latest 2 income returns 

A well-known bank usually has a team of technical and legal experts who would review your application in your presence and guide you through all the steps. This can help save more time since you won’t need to visit the bank several times.