Commercial property loan is a popular option in India to secure some much-needed cash for big-ticket financial needs. This loan is well-favored among borrowers and lenders alike owing to its ease of availability and flexibility.
However, most borrowers aren’t fully aware of the know-how of commercial property loans. This article surmises the dos and don’ts of the loan and explores the multiple aspects of the loan for your convenience. Read on!
A commercial property loan is a loan taken against commercial property to fund a big-ticket expense or fulfill other financial obligations. The property used as the collateral must be used for commercial purposes and not residential.
Businesses avail commercial property loans to set up shops, and offices, or expand their operations through investments, acquisitions, or constructions.
Commercial property loans are usually taken by an enterprise, a company, or self-employed individuals. The application process entails the submission of required documents, fulfillment of eligibility terms set by the lender, and several other factors.
Let us look at all the affecting paraments in commercial property loans in detail.
The qualifying norms vary from lender to lender, but there are a few eligibility requirements that are among all lenders. The requirements are as follows.
Self-employed individuals are eligible for this loan
The applicants must be aged between 24 and 70(By the time loan repayment is done)
This loan is available only to citizens of India
The applicant must possess a steady source of income and a functional business
The property must be free of legal complexities
Additionally, borrowers must have the necessary CIBIL score as per the lender's requirements
Borrowers must submit the necessary documents during the loan application process for quick verification and approval. It is important to keep the following documents handy before applying.
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Filled out loan application form |
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PAN, Voter ID, Passport, Aadhaar card, or any government-issued identity document |
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The prominent lenders in the market offer commercial property loans at the following rates.
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Lender |
Interest Rate(p.a) |
Processing Fee |
| HDFC bank | 8.50 - 9.40% | Upto 1% of the loan amount |
| PNB Housing Finance |
9.25 - 12.35% (based on credit score) |
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| Axis bank | 10.50 - 10.95% | 1% or Rs. 10,000 |
| ICICI bank |
10.85 - 12.50% (Based on your employment) |
(0.50 - 2.00% or Rs. 3000) + GST |
| Kotak bank | Start at 9.15% | 1% + GST and statutory dues |
The commercial loan interest rates depend on the market value f the property, the CIBIL score of the borrower, existing loans & EMIs, and several other factors. Please note that these rates are subject to change at the discretion of the bank.
Applying for a commercial property loan can be daunting. From finding the right lender to submitting proper documents, the loan process is a tiring one. Hence, we have compiled a list of a few important things to remember when applying for a loan to make the process easier.
Put in time and effort to find the right lender. Understand the terms and fees of every lending institution, from banks to online lenders so your loan journey becomes easier.
After choosing the perfect lender for your needs, take a look at their eligibility requirements and necessary documents. Keep the documents handy to endure a timely submission.
Your loan amount depends on the value of your property. Check what your property is worth in the current & future markets to understand how much loan you will be availing.
After loan approval, EMIs influence your financial decisions. Hence, it is wise to understand if you can repay the loan beforehand.
You can calculate your EMIs using our loan EMI calculator in just a few seconds!
Apart from the loan amount, there are processing fees, prepayment charges, foreclosure charges, and other charges that the borrower must be aware of. So, choose a lender who is transparent about the charges involved.
Keeps some funds aside to help you in times of emergency. You can use it to pay off loan EMIs if the need ever arises.
A commercial property loan allows you to borrow large amounts of money that can help you meet medium and long-term business or personal needs. Individuals or companies in possession of commercial properties can put the properties as collaterals and borrow necessary funds if they fulfill the eligibility requirements of the lender. However, before borrowing, make sure to check all the aspects of the loan to equip yourself better to handle the loan process more efficiently.
You can use the commercial property loan for shop purchases, expanding the retail business, buying necessary inventory, and several other needs as you see fit.
Even though it is not mandatory, several borrowers take loan protection insurance to safeguard themselves against financial emergencies or unfortunate circumstances.
Self-employed professionals such as doctors, CAs, lawyers, consultants, etc, and self-employed non-professionals namely business individuals, contractors, traders, etc, enterprises, and companies, can apply for a commercial loan. The main requirement to avail this loan is the borrower must possess a commercial property that is devoid of legal issues.
Loans for commercial real estate are secured by the property, which serves as collateral. This means that the lender may foreclose on the property and sell it to recover its losses if the borrower defaults on the loan.
The loan amount depends on the Loan-To-Value(LTV) ratio. The loan amount is divided by the asset's or collateral's value to determine the loan-to-value (LTV).
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