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A commercial property loan allows you to borrow funds by mortgaging your commercial property. These loans fall under the secured category. Thus, the interest charged is usually lower compared to other unsecured loans. Keep reading to find out all you need to know about commercial property loans. 

Benefits of Commercial Property Loan

A commercial property loan has a number of benefits for business owners. Some of these are listed below:

  • Higher Loan Amount 

Most banks offer a commercial property loan amounting to 55% of the property’s market value. This can help you meet big-ticket expenses easily.

  • Lower Rate of Interest

As it is a secured loan, financial institutions offer these loans at lower interest rates. The commercial property loan interest rates start as low as 9% p.a.  

  • Easy Application Process

A commercial property loan does not have extensive eligibility criteria or require a lot of paperwork. This makes them a great choice during emergencies when you’re in need of funds.

Important Aspects of a Loan Against Commercial Property

If you wish to opt for a commercial property loan in India, here are essential aspects that you must consider before applying.

  • Collateral

If you choose to opt for a commercial property loan, you must first find out the type of commercial property you can mortgage. You can get a loan against commercial property like a grocery shop, office building, manufacturing shop, and so on.

  • Builder Records

If you are applying for a commercial property loan against a project that is still under construction, run a background check on the builder. Also, ensure that the builder has already secured all the requisite approvals for the construction. If there are any discrepancies in the builder’s records, your loan may be rejected.

  • Loan Amount

The amount of loan that you can get with a commercial property loan depends on the market value of the property. This is called the Loan-to-Value (LTV) ratio. The LTV ratio of commercial property loans is generally lower than that of loans against residential property.

  • Repayment

Commercial property loans have a longer tenure in comparison to other loans. It can range up to 15 years, enabling you to repay the loan at a more gradual pace and resulting in a lower strain on your finances. To plan your finances better, you can use a Loan Against Property EMI Calculator and compute the EMIs you are likely to pay.

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Eligibility Criteria for a Commercial Property Loan

To get a commercial property loan, you need to fulfil some basic eligibility criteria. Here is a table highlighting some common criteria that a majority of lenders may require you to fulfil.

  • Citizenship - Indian

  • Age - 25 to 70

  • Employment type - Salaried or self-employed

  • Minimum income - ₹25,000 to ₹30,000

  • Minimum work experience - 3 to 5 years

*Disclaimer: The eligibility criteria may differ from one lender to another. The details mentioned above are for informational purposes only. 

Documents Required for a Commercial Property Loan

Provided below is a list of documents that are usually required to apply for a commercial property loan. 

  • Proof of Identity: 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 paperwork related to mortgage and ownership

  • PAN details or Form 60

1. Proof of Employment 

  • For Salaried Individuals - Employer-issued identity card

  • For Self-employed Individuals - Business registration certificate, partnership agreement, and so on

2. Proof of Income

  • For Salaried Individuals - Last year’s ITR, salary slips of the last 2 months, and bank account statements of the last 3 months

  • For Self-employed individuals - ITR of the last 2 years, balance sheet, P&L statement, and bank account statements of the last 6 months

In conclusion, a commercial property loan is the best-suited option if you wish to borrow a higher amount at lower interest rates. Make sure to check the eligibility criteria discussed above and keep the required documents handy for a smooth and seamless application process.

On Bajaj Markets, you can browse other credit options like loan against property. The application process is simple and can be completed entirely online. 

FAQs on Commercial Property Loans

Can you get a loan against commercial property?

Yes, you can get a loan against commercial property. However, you must note that the commercial property loan Loan-to-Value (LTV) ratio is limited to about 55%. On the other hand, it lies between 75% - 90% in the case of residential properties.

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.

 

What is the credit score required for a Commercial Property Loan?

The ideal credit score required for a commercial property loan is 750 or more.

Is insurance necessary to obtain a commercial property loan?

Although the RBI has not issued any directive for the same, it is advisable to insure your property for any calamities, prior to applying for the loan.

 

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