A Commercial / Industrial Property Loan is a credit option that a lender offers against the mortgage of Commercial / Industrial or Non-residential Property. A Commercial / Industrial Property is one that you use to run a business, factory or any other Commercial / Industrial undertaking. To purchase Commercial / Industrial real estate, you can take a Commercial / Industrial Property Loan. Similarly, you can get mortgage loan against commercial / industrial property for your big budget expenses.
Loan to Purchase Commercial / Industrial Property
A Commercial / Industrial Property Purchase Loan is a type of mortgage loan that is secured through the mortgage of commercial / industrial property instead of residential property. However, lenders refers to Commercial / Industrial Property Loan as loan given to purchase commercial / industrial property.
As far as the complicated application procedures for Home Loan is concerned, the same procedure is followed for the purchase of commercial / industrial properties like factory, Office, Shop, Grocery Store, Shed etc. Since the process of availing loan for purchase of commercial / industrial property is complicated as compared to the process of Home Loan and it is generally observed that financial institutions are more careful in sanctioning loan for purchase of Commercial / Industrial Property, especially those which are under construction.
Loan Against Commercial / Industrial Property
A Commercial / Industrial Property Loan allows to avail of sizeable funding by mortgaging commercial / industrial real estate owned by you. The Commercial / Industrial Property may be the one you use for your business or any other profit generating purposes. Depending on the market value of your commercial / industrial real estate you get funding for all types of expenditure like Higher Education, Business Expansion, Family Wedding, Debt Consolidation or buy expensive machinery etc.
Eligibility Criteria for Commercial / Industrial Property Loan
The eligibility criteria for a commercial / industrial property loan may vary slightly from one financial institution to another. However, the following are some general criteria that are commonly considered by lenders :-
- Age :- The borrower should be between 21 and 60 years of age.
- Business Experience :- The borrower should have a minimum number of three years of experience in the relevant business or employment.
- Financial Stability :- The borrower’s financial stability and creditworthiness play a crucial role in determining eligibility. Lenders evaluate the borrower’s income, profitability, cash flow, and credit history to assess their repayment capacity.
- Property Valuation : The commercial / industrial property being financed is an essential aspect. Lenders will assess the property’s value, location, condition, and potential for generating income.
- Loan-to-Value Ratio (LTV) :- The LTV ratio typically ranges from 60% to 80%, depending on the lender’s policies.
- Legal Compliance :- The property being financed should have clear titles and should comply with all legal requirements, including building regulations, zoning laws, and environmental regulations.
- Debt-to-Income Ratio (DTI) :- Lenders also consider the borrower’s debt-to-income ratio, which is the proportion of their monthly income that goes towards debt repayment.
- Loan Amount : The loan amount for commercial / industrial property loans varies across lenders. Generally, Loan amount varies from Rs. 5 lakhs to Rs. 20 crores. It is typically determined based on the borrower’s repayment capacity, property valuation, and the lender’s policies.
Documents Required for Commercial / Industrial Property Loan
To apply for a Commercial / Industrial Property Loan, borrowers need to provide the following documents :-
- Identity Proof :- Applicant, Co-applicant or Company Pan Card Copy
- Address Proof :- Any government-issued document such as Aadhaar Card, Utility Bill, Passport, Voter ID or Company Registration Certificate.
- Income Proof :- One year GST Return, three years ITR with financial and for Salaried – three months salary slip with Form-16.
- Bank Statement :- The borrower needs to submit a bank statement for the last 12 months to establish the financial position of the business or employment.
- Property Documents :- Minimum 13 years property chain with current Title Deed, Allotment Letter, Possession Letter, Sanction Map, Floor Plan, Route Map etc.
- Login Fee :- Login Fee may vary slightly from one financial institution to another. Generally, takes Rs.5900/-
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Frequently Asked Questions (FAQs)
1. What is a commercial property loan ?
A commercial property loan is a type of loan provided by banks or financial institutions to individuals or businesses for the purpose of purchasing or refinancing commercial properties such as offices, shops, warehouses, or industrial units.
2. What is the maximum loan amount I can avail for a commercial property loan ?
The maximum loan amount varies among lenders and is typically determined based on factors such as the property’s value, the borrower’s repayment capacity, and the lender’s policies. It is usually a percentage of the property’s value, with the remaining amount required as a down payment.
3. What is the repayment tenure for a commercial property loan ?
The repayment tenure for a commercial property loan can range from 5 to 20 years, depending on the lender and the borrower’s preferences. Some lenders may offer longer repayment periods, but it’s important to note that longer tenures may result in higher interest costs.
4. What interest rates are applicable to commercial property loans ?
Interest rates for commercial property loans in India can be either fixed or floating, and they vary among lenders. The interest rates are typically influenced by factors such as the borrower’s creditworthiness, loan amount, repayment tenure, and prevailing market conditions.
5. What are the eligibility criteria for a commercial property loan ?
The eligibility criteria may vary among lenders, but typically include factors such as the borrower’s age, business experience, financial stability, property valuation, legal compliance, and debt-to-income ratio. It’s advisable to check with the specific lender for their detailed eligibility criteria.
6. Can I avail a commercial property loan for purchasing a property under construction ?
Yes, some lenders offer commercial property loans for properties under construction. However, the specific terms and conditions may vary, and the disbursement of the loan may be linked to the progress of the construction.
7. Can I prepay or foreclose a commercial property loan ?
Yes, most lenders allow borrowers to prepay or foreclose their commercial property loans. However, there may be prepayment charges or penalties involved, depending on the lender’s policies.
8. Can I get a commercial property loan for renovating an existing property ?
Yes, some lenders offer commercial property loans for renovation purposes. The loan amount and terms may depend on factors such as the extent of renovation, the property’s value, and the lender’s policies.
9. Can I use a commercial property loan for purchasing land or agricultural property ?
Commercial property loans are typically meant for purchasing income-generating commercial properties. However, some lenders may offer specific loan products for purchasing land or agricultural properties. It’s best to inquire with the lender about their offerings in such cases.
10. How long does the loan approval process take ?
The loan approval process duration can vary depending on several factors, including the lender’s internal processes, the completeness of the application and documentation, and the property valuation process. Generally, it can take a few weeks to be approved and disbursed.
11. What is an Industrial Property Loan ?
An industrial property loan is a type of financing specifically designed for purchasing or refinancing industrial properties, such as warehouses, factories, distribution centers, or manufacturing facilities.
12. How do Industrial Property Loans differ from Residential or Commercial Property Loans ?
Industrial Property Loans are specifically tailored for industrial properties and differ from residential or commercial property loans in terms of loan terms, interest rates, and eligibility criteria.
13. What are the typical eligibility requirements for an Industrial Property Loan ?
Eligibility requirements may vary among lenders, but common criteria include a strong credit history, sufficient income, a stable business or employment record, and a down payment.
14. What types of Industrial Properties are eligible for financing ?
Industrial properties that may be eligible for financing include warehouses, manufacturing plants, industrial parks, distribution centers, storage facilities, and other similar properties.
15. How much down payment is typically required for an Industrial Property Loan ?
Down payment requirements vary depending on the lender and the borrower’s creditworthiness. However, a typical down payment for an industrial property loan can range from 20% to 40% of the property’s value.
16. What are the interest rates for Industrial Property Loans ?
Interest rates for industrial property loans are influenced by factors such as the borrower’s creditworthiness, the property’s location and condition, and prevailing market rates. Rates can vary but typically range from 8% to 15%.
17. What is the loan term for Industrial Property Loans ?
Loan terms for industrial property loans can vary, but they commonly range from 5 to 20 years. Some lenders may offer longer terms depending on the specific circumstances.
18. What documents are typically required for an Industrial Property Loan application ?
Common documents required for an industrial property loan application include personal and business financial statements, tax returns, bank statements, property details, business plans, and legal documents related to the property.
19. Can Industrial Property Loans be used for property renovations or expansions ?
Yes, industrial property loans can be used for renovations, expansions, or improvements to the existing industrial property. Lenders may have specific guidelines and restrictions regarding the use of loan funds for these purposes.
20. What are the consequences of defaulting on an Industrial Property Loan ?
Defaulting on an industrial property loan can lead to serious consequences, including foreclosure and the loss of the property. It can also negatively impact the borrower’s credit score and make it challenging to secure future financing.
