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Loan Against Property: What You Need To Know

5 minsMay 04, 2019

Niraj (43), a chemical engineer by qualification, is a successful businessman running a chemical factory in Panvel, Mumbai over more than a decade. Being enterprising by nature, he desired to expand his business. However, how to raise the funds was the question he was pondering upon. While loan against a commercial property was an option, it wasn’t viable for Niraj since his factory and office were on lease – not self-owned.

So, one day as he was exploring the options and talking to various people, his associate from the industry said, ‘why don’t you consider taking a loan on a residential property’?

Niraj lived in a plush 3BHK flat in South Mumbai, plus owned a couple of more 2BHK flats in suburbs. So, he took some time to think over, gained the confidence of his family and finally made up his mind to opt in for a loan against one of his residential property in suburbs, which was valued around Rs 2.5 crore.

Loan Against Property

However, Niraj wanted to know more. So, he walked into an Axis Bank branch and here’s what he found out…

A loan against residential property is offered to the following individuals:

Salaried: An individual who is in permanent service in the government or a reputed company. Further, he/she should be above the age of 24 years at the time of loan commencement and up to the age of superannuation.

Self-employed businessmen: Any individual filing Income Tax Return (ITR) and who is over 24 years of age at the time of loan commencement and up to 65 years at the time of maturity.

Self-employed Professionals: Professionals such as doctors, engineers, dentists, architects, chartered accountants, cost accountants, company secretary, and management consultants can apply. The age criterion is similar to that of self-employed individuals.

Unlike home loans, car loans or two-wheeler loans, the ‘loan against property’ can be used for whatever the purpose be -- purchasing a commercial property, for business purpose, to renovate commercial premises, and even to renovate your home, to fund your children’s higher education, and so on.

The property you take a loan against is offered as collateral/mortgage and the bank forwards the loan at an attractive rate of interest for a loan tenure of up to 20 years, in case of salaried individuals and up to 15 years in case of self-employed individuals.

However, while sanctioning the loan amount the bank takes into account factors such as:

  • Property registration
  • The market value of the property;
  • The requirement and eligibility of the applicant
  • The applicant’s individual income;
  • Whether salaried or self-employed;
  • Credit score —to assess the creditworthiness

The minimum one can borrow is Rs 5 lakh, while the maximum is Rs 5 crore.

The bank official also explained that a variant of loan against property is Overdraft Facility Against Property. This is designed to address the short-term working capital requirements of mainly self-employed individuals (resident Indians only) in business and profession (resident Indians only).

But since, Niraj’s requirement was not to meet short-term working capital requirements but to borrow funds to expand his business; the best-suited option for him was a vanilla ‘loan against residential property’.

Here are the documents that need to be submitted by him:

  • Proof of identity (Aadhaar, voter id, passport, driving license, PAN card, etc.)
  • Proof of address (Aadhaar, Driving license, property tax receipt, electricity bill, gas bill, landline telephone bill, etc.)
  • Date of Birth (Aadhaar, PAN card, birth certificate, passport, driving license, etc.)
  • Signature proof (Passport, PAN card, banker’s verification, etc.)
  • Proof of income ( 2 years Income Tax Returns, Computation of Total Income, P&L, Balance sheet with CA seal and sign, Tax Audit Report, 6 months bank statements of personal and business accounts, If ITR is filed without digital sign - CPC and tax paid challan, Certificate of Incorporation, MOA and AOA of his company, and proof of business continuity)
  • And at the time of loan disbursement documents such as loan agreements and annexures thereto, property documents, National Automated Clearance House (NACH) mandate/ Standing Instruction (SI) form, Security Cheques (SPDCs), cheque for processing fee, duly filled Property Insurance application form, duly filled Life Insurance application form, sanction letter, and a few others)

To know the eligibility criteria in detail for every type of applicant, click here.

Niraj was satisfied with the interest rate and the terms and conditions of the loan. The EMI was affordable and he went ahead with his decision of taking a ‘loan against residential property’ to expand his business.

To know the rate of interest for a ‘loan against property’ and the other charges applicable, click here.

Niraj is now well on the track to fulfil his dream of expanding his business.

Loans can certainly help in fulfilling your needs and make long overdue plans a reality. What are you waiting for? Apply now for a Loan against Property from Axis Bank!

Disclaimer: This article has been authored by PersonalFN,. Axis Bank doesn't influence any views of the author in any way. Axis Bank & PersonalFN shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.

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