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What is Commercial Property Loan?

A commercial property loan refers to a secured loan obtained against any commercial property that you own – enabling you to secure substantial funding by mortgaging your commercial property. If you wish to expand your business – be it buying more machinery, upgrading existing machinery, or buying new plants – this means of mortgaging offers you ample financing. If you own commercial property, you can avail as much as 60% of the property’s value as a loan, for a tenure of up to 15 years. Over the course of this article, we shall look deeper into all aspects of a commercial property loan in India.

Benefits of Commercial Property Loan

The benefits of opting for a commercial property loan are as elucidated below:

  • Larger Loan Amount: If you opt for a commercial property loan in India, you can avail up to 60% of the value of the property, or up to Rs. 5 Crores. This sizeable sum of money will greatly aid you in fulfilling the needs of your business.

  • Lucrative Interest Rates: Given the fact that the loan is secured by mortgaging your commercial property, you can avail of interest rates that start at 9%.

  • Seamless Process and Easier Terms: Commercial property loans come with the added benefit of no end-usage restrictions, with the process of availing the same being transparent, seamless, and quick.

  • Custom Loan Solution: Given that every business has its own unique needs and requirements, these loans are designed to meet the specific needs of every business at hand.

Commercial Property Loan Interest Rate

If you choose to opt for a commercial property loan from Bajaj Housing Finance, the fees, and charges applicable on your loan are as listed below:

Applicant Category

Effective Rate of Interest (per annum)

Salaried/Self-Employed

9% p.a. onwards

The charges applicable on your loan are as elucidated below:

Fee Category

Applicable Charges

Processing Fee

Up to 0.35% of the loan amount

Foreclosure Charges

4% of outstanding loan amount + GST


The Pre-payment and foreclosure charges for individuals are as listed below:

Individual

Flexi Loan

Term Loan

Time Period

>1-year

> 1-year

Foreclosure Fees

NIL

NIL

Part Payment Fees

NIL

NIL

The Pre-payment and foreclosure charges for non-individuals are as listed below:

Non-Individual

Term Loan

Flexi Loan

Time Period

>1-year

> 1-year

Foreclosure Fees

4% on the outstanding principal

4% on the sanctioned amount during the Flexi Interest Only Loan Repayment Tenure and 4% on the available Flexi Loan Limit during the Flexi Term Loan Tenure

Part Payment Fees

2% on the Part Payment Amount

NIL

How Does a Loan on Commercial Property Work?

If opting for a commercial property loan in India, you must first understand how it works. The following 3 factors must be kept in mind:

  • Collateral: If you choose to opt for a commercial property loan, you must first start by owning commercial property, which you can mortgage. This can be in the form of a grocery shop, office building, manufacturing shop, and so on.

  • Loan Amount: In this case, the loan-to-value, or the LTV, will help determine how much funding you can obtain. Thus, if your property is estimated at Rs. 1 Crore and the LTV stands at 50%, then you will receive Rs. 50 Lakhs. Commercial property loans offer lower LTV rates as compared to loans on residential properties.

  • Repayment: When it comes to repayment, the tenure on commercial loans is usually longer; as long as 18 years. If you wish to plan adequately for your loan, you can refer to a Loan Against Property EMI Calculator to gauge the interest rates.

Commercial Property Loan Eligibility

To be eligible for a commercial property loan, the following set of criteria has been defined:

Particulars

Salaried

Self-Employed

Residency

Must be a citizen and resident of India, who owns property in Delhi NCR, Mumbai and MMR, Chennai, Hyderabad, Bangalore, Pune, and Ahmedabad.

Must be a citizen and resident of India, who owns property in Delhi NCR, Mumbai and MMR, Chennai, Hyderabad, Bangalore, Pune, and Ahmedabad.

Age

28 – 58 years

25 – 70 years

Employment Status

Employed in the public, private or MNC sector.

Should have a regular source of income.

Income

Varies from city to city, starting from Rs. 25,000 to Rs. 35,000.

Varies from city to city, starting from Rs. 25,000 to Rs. 35,000.

Experience

Over 3+ years of experience.

Over 5+ years of experience.

Commercial Property Loan Documents

If you wish to apply for a commercial property loan, you must possess the following documents:

  • Proof of Income: in the form of a PAN card, Aadhaar card, Passport, Voter ID, or Driving Licence.

  • Proof of Address: Aadhaar card, Voter ID, Passport, Ration card, and Utility bills.

  • Property Documents: Title documents and other documents related to mortgage and ownership.

  • PAN details or Form 60.

When it comes to employment and income proof, the following documents must be presented by salaried and self-employed parties:

Documents

Salaried

Self-Employed

Proof of Employment

Employer-issued identity card

Business registration certificate, partnership agreement and so on

Proof of Income

Income Tax Return for the last year

Income Tax Return for the last 2 years

Last 2 month’s salary slips

Balance Sheet and Profit and Loss statements

Last 3 month’s bank account statements

Last 6 month’s bank account statements

Commercial Property Loan EMI

Once the commercial property loan is disbursed, it is generally for a period of 15 years, with a monthly EMI applicable on the same. The interest rates for loans against commercial properties lie between 9% and 24%, depending on a range of factors such as market value, mortgage, credit history, income generation ability, and documents available. When your interest rate is decided, make use of a commercial property loan EMI calculator, to help you better plan for your payments.

Check the LAP EMI Calculator

How to Apply for Commercial Property Loan?

If you wish to avail of a commercial property loan in India, you must follow the steps listed below:

  • Step 1: Visit the lenders' website and look for the application section.

  • Step 2: Proceed by entering the requisite details such as your name, employment type, mobile number, and email id.

  • Step 3: Next, enter details pertaining to your income and finances.

  • Step 4: Proceed by submitting the application form online.

Once you have done so, a representative from the lending agency will get in touch with you, to process and approve your commercial property loan application.

Differences Between Funding Residential and Commercial Property

The difference between funding residential and commercial property is as listed below:

Funding Residential

Commercial Property

Typically made to individual borrowers.

Typically made to business entities.

The repayment tenure for the mortgage in this category is 30 years, at a fixed rate.

The duration varies, from less than 5 years to 20 years, with a variable rate of amortisation.

High loan-to-value ratio, or sometimes even 100%.

Commercial property loan ltv - Loan-to-value ratio lies between 65% and 80%.

Things to Keep in Mind Before Applying for Commercial Loan

Before applying for a commercial property loan in India, make sure you are cognizant of the following key aspects:

  • If by chance you are applying for a commercial property loan on a project that is still under construction, run a background check on the builder. If the lender stumbles upon any discrepancies in the builder’s records, your loan stands a chance of being rejected.

  • Make it a point to ensure that builder has already secured all the requisite approvals for the construction.

  • To avoid paying a higher amount, ensure that you first get the property evaluated by a professional.

Loan Against Property Quick Links

Loan Against Property Articles

Home Loan Quick Links

FAQ’s on Commercial Property Loan in India

  • ✔️Can you get a loan on commercial property?

    Yes, you can get a loan on commercial property. However, you must note that the commercial property loan ltv (loan to value) ratio lies between 75% - 90%, and in the case of residential properties, it is limited to about 55%.

  • ✔️What is the difference between home loans and commercial property loans?

    The major difference between a home loan and a commercial property loan is the loan tenure. While the tenure for a commercial property is restricted to a maximum of 10 years, that for a home loan can go up to 30 years.

  • ✔️How many commercial loans can you have?

    Technically, there is no limit to the number of commercial loans you can have. However, financing the same can prove to be a challenge.

  • ✔️Can You Get a Mortgage on a Commercial Property?

    Yes, you can obtain a mortgage on commercial property.

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