Commercial Property Loan - Meaning, Eligibility, Documents, & more

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!

What Is Commercial Property Loan?

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. 

How To Apply For A Commercial Property Loan?

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.  

Eligibility Criteria For A Commercial Property Loan

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.

Documents Required For Commercial Property Loan

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.


  1. Form

Filled out loan application form

  1. Proof Of Identity/Address

PAN, Voter ID, Passport, Aadhaar card, or any government-issued identity document

  1. Proof of Income

  • For salaried professionals

    • Form 16

    • Salary slips

  • For self-employed individuals

    • Income tax statements for the past 3 years

    • Proof of business or license 

  1. Related property documents  

  • Buyer agreement/letter of allotment

  • Title deed

  • Occupancy certificate

  • Possession certificate

  • Payment details related to the property(in some cases)

  1. Other documents(based on the lender)

  • Passport size photographs

  • Existing loan details

  • Business Profile

  • Partnership deed

  • Memorandum and AoA(Articles of Association)

  • Proof of own contribution

  • Check for processing fee

  • List of stakeholders


Interest Rates & Fees For A Commercial Property Loan

The prominent lenders in the market offer commercial property loans at the following rates.

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)

-
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.

Factors To Consider Before Taking A Commercial Property Loan

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. 

You can calculate your EMIs using our loan EMI calculator in just a few seconds!

Conclusion

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. 

Commercial Property Loan - Related FAQs

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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