Commercial Property Loan
A commercial property loan, often referred to as a business or commercial land loan, is offered by various lenders in India. This is to facilitate the purchase of commercial properties, including land and structures, for business purposes. These loans meet the unique needs of entrepreneurs and businesses looking to acquire or invest in commercial real estate.
Prominent financial institutions offer competitive commercial property loan options, allowing individuals to secure funds to purchase commercial assets. These loans also serve as a crucial tool for businesses seeking to expand, upgrade, or establish a physical presence by acquiring properties for operational or investment purposes.
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Benefits and Features of Commercial Property Loan
Commercial property loans in India are designed with businesses in mind, offering tailored solutions for buying land, buildings, or both. You can secure substantial loan amounts with competitive interest rates, making repayments manageable and enhancing profitability.
- Flexibility in repayment options lets you align with your cash flow.
- Plus, there are tax benefits to lighten the financial load.
- These loans cover a range of properties – offices, retail spaces, warehouses, and more.
- The approval and disbursal process is quick so that you can kickstart your operations promptly.
- Leveraging the property’s value as collateral, you can secure the funds you need for growth and expansion, including property development or renovation tailored to your requirements.
Eligibility Criteria for Commercial Property Loan
If you want to apply for a commercial property loan in India, here’s what you need to know.
- You should be an Indian citizen.
- Your age matters too – usually between 21 to 65 years if you’re salaried or 25 to 70 years if you’re self-employed.
- A steady income from your business or profession is essential, enough to cover loan repayments.
- And a good credit score helps—around 750 or more is great.
- Now, about the property – you should own a commercial property without any legal issues and meet the lender’s valuation and location standards.
- This property can be used as collateral or for rental income. When you apply, make sure you have your identity proof, address proof, income documents, bank statements, and property papers handy.
- You can use an online EMI calculator to estimate your monthly payments and total interest based on the loan amount, interest rate, and tenure.
Fees and Charges of Commercial Property Loan
When applying for a commercial property loan, you can expect to encounter a few charges.
- Firstly, there’s a one-time processing fee, typically 1-2% of the loan amount.
- If you pay off a part or the full loan before the tenure ends, there might be prepayment charges, varying with the loan type and interest rate.
- Additionally, other minor charges could be during the loan period, like cheque bounce fees or document processing charges.
- The exact fees vary between lenders, so reviewing the terms carefully is essential.
Documents Required for Commercial Property Loan
You’ll need to provide important documents to apply for a commercial property loan.
- Start with a filled loan application form and valid ID and address proofs like a passport, Aadhar card, or utility bills.
- For your business, submit documents like certificates of incorporation, partnership deeds (if applicable), and financial statements for the past years.
- Don’t forget property-related papers like sale deeds, title deeds, and property tax receipts.
- Also, ensure to include your income proof and credit history.
How Commercial Property Loan Works?
Working on a commercial property loan is not as complicated as it sounds. A commercial property loan is like borrowing money from a bank to buy a place where you can run a business. This could be a shop, an office, a factory, or even land when you plan to build something for your business.
Let’s say you want to start a restaurant and need a place to set it up. You find a great location but don’t have enough money to buy it. That’s why a commercial property loan comes in handy. You go to a bank and ask them for a loan to buy that property. The bank checks if you are eligible, and if they approve, they give you the money you need to buy the place.
Now, you can start your restaurant in that space and slowly pay back the money you borrowed from the bank, plus a little extra (called interest) over time. It’s like a helping hand from the bank to get your business up and running in the right place!
Commercial Property Loan for Salaried Person
If you are a salaried person in India and you want to take a loan on a commercial property, you might be interested in the following information:
To qualify for a commercial property loan in India, you must be an Indian citizen aged between 28 and 58 with a stable income ranging from Rs. 25,000 to Rs. 35,000, based on your city. A good credit score of 750 or above is crucial for favourable loan terms. Owning a dispute-free commercial property that meets valuation and location standards is essential.
| Bank | Interest Rate | Loan Amount | Loan Tenure | Processing Fee |
| ICICI HFC | 9.5% – 11.5% p.a. | ₹ 3 lakh – ₹ 5 crore | Up to 15 years | Up to 2% of the loan amount |
| HDFC Bank | 8.9% – 10.5% p.a. | ₹ 10 lakh – ₹ 15 crore | Up to 15 years | Up to 1.5% of the loan amount |
| Axis Bank | 9.75% – 11.25% p.a. | ₹ 50 lakh – ₹ 5 crore | Up to 20 years | Up to 1% of the loan amount |
| SBI Bank | 9.95% – 11.45% p.a. | ₹ 50 lakh – ₹ 7.5 crore | Up to 15 years | Up to 1% of the loan amount |
| Kotak Mahindra Bank | 9.25% – 11% p.a. | ₹ 50 lakh – ₹ 10 crore | Up to 15 years | Up to 2% of the loan amount |
| IDBI Bank | 9.65% – 10.65% p.a. | ₹ 10 lakh – ₹ 5 crore | Up to 10 years | Up to 1% of the loan amount |
| IndusInd Bank | 9.5% – 12% p.a. | ₹ 10 lakh – ₹ 15 crore | Up to 15 years | Up to 2% of the loan amount |
| PNB Housing Finance | 9.75% – 11.25% p.a. | ₹ 15 lakh – ₹ 50 crore | Up to 20 years | Up to 2% of the loan amount |
| Bajaj Finserv | 10% – 12% p.a. | ₹ 20 lakh – ₹ 3.5 crore | Up to 20 years | Up to 3% of the loan amount |
| LIC Housing Finance | 8.7% – 10.25% p.a. | ₹10 lakh – ₹15 crore | Up to20 years | Up to1% of the loan amount |
Things You Need to Know Before Getting a Commercial Property Loan
Before getting a commercial property loan in India, there are some things that you need to know and consider, such as:
- Eligibility Criteria: To qualify, you must be an Indian citizen and resident within the eligible age range, with a steady income, good credit score, and a clear commercial property title.
- Loan Amount and Tenure: You can borrow up to 75% of the property value or Rs. 30 crores, whichever is lower. The loan term can be 15 or 25 years, based on the lender and loan type.
- Interest Rate and Fees: Interest rates vary based on factors like credit profile, loan amount, property type, etc. Expect rates from 8% to 15% p.a. Fees include processing fees (1-2% of loan amount), prepayment charges, and other applicable fees.
- Documentation and Verification: Provide KYC, income proof, and property documents. Lenders verify these documents and assess your property before approval.
- Repayment Options: Repay through monthly EMIs. Use an EMI calculator to estimate payments. Flexible options like overdraft facilities are available for convenient repayments.
Commercial Property Loan Offers
Here are some top banks and their commercial property loan offers:
SBI Commercial Property Loan
| Bank | Interest Rate | Loan Amount | Loan Tenure | Processing Fee |
| SBI | 8.50% to 9.40% p.a | Up to Rs. 50 crore | Up to 15 years | 1% of the loan amount + GST |
HDFC Commercial Property Loan
| Bank | Interest Rate | Loan Amount | Loan Tenure | Processing Fee |
| HDFC | 8.75% to 9.40% p.a | Up to Rs. 30 crore | Up to 15 years | 1% of the loan amount + GST |
ICICI Commercial Property Loan
| Bank | Interest Rate | Loan Amount | Loan Tenure | Processing Fee |
| ICICI | 8.75% to 9.40% p.a | Up to Rs. 5 crore | Up to 15 years | 1% of the loan amount + GST |
Axis Bank Commercial Property Loan
| Bank | Interest Rate | Loan Amount | Loan Tenure | Processing Fee |
| Axis Bank | 10.50% to 11.50% p.a | Up to Rs. 5 crore | Up to 20 years | 1% of the loan amount + GST |
BOB Commercial Property Loan
| Bank | Interest Rate | Loan Amount | Loan Tenure | Processing Fee |
| BOB | 10.85% p.a. onwards | Up to Rs. 25 crore | Up to 15 years | 1% of the loan amount + GST, capped at Rs.10 lakh |
LIC HFL Commercial Property Loan
| Bank | Interest Rate | Loan Amount | Loan Tenure | Processing Fee |
| LIC HFL | 9.50% to 11.50% p.a | Up to Rs. 10 crore | Up to 15 years | 1% of the loan amount + GST, capped at Rs.10,000 |
FAQs
Ideally, the credit score preferred by many lenders remains 680 or above; however, depending on other factors like good turnover, location of the property value, etc., borrowers can afford a slightly lower credit score.
Various commercial property loans in India are curated to cater to a vast customer base. However, a few loan types stand out, including working capital and term loans.
Commercial property loans are specifically designed for commercial spaces like shops, offices, warehouses, etc. One does not have the provision to use a home loan for commercial purposes.
In India, a loan taken for purchasing, constructing, repairing, or renovating a commercial property allows for a deduction of the interest paid under Section 24(b) of the Income Tax Act, up to Rs. 2 lakh annually for self-occupation or business use, and without limit if the property is rented out.