A Comprehensive Guide for Industrial Property Purchase Loan

An industrial property purchase loan is a type of loan that helps individuals or businesses finance the purchase of industrial properties such as factories, warehouses, and manufacturing units. These loans can be secured or unsecured, and are usually provided by banks, financial institutions or NBFCs (non-banking financial companies). The loan amount, interest rates, and repayment tenure may vary depending on the lender’s policies and the borrower’s eligibility criteria. An industrial property purchase loan can provide individuals or businesses with the necessary funds to expand their operations or start a new venture, and can be a great financial tool for acquiring industrial properties.

How does an Industrial Property Purchase Loan work ?

An industrial property purchase loan works like any other loan. Individuals or businesses need to apply for the loan with the lender and submit the required documents such as identity proof, address proof, income proof, property details, etc. The lender will then evaluate the application and the documents provided to determine the eligibility of the borrower.

Once the loan is approved, the borrower can avail of the funds to purchase the industrial property. The loan amount, interest rate, and repayment tenure will be decided at the time of loan approval, based on the lender’s policies and the borrower’s eligibility criteria. The borrower will have to repay the loan amount in EMIs (Equated Monthly Installments) over the tenure of the loan. The EMIs consist of both the principal amount and the interest charged on the loan.

In case of a secured loan, the borrower needs to provide collateral such as the industrial property being purchased, as security against the loan. If the borrower defaults on the loan, the lender can take possession of the property and sell it to recover the outstanding amount.

Key Features of Industrial Property Purchase Loan

1. The interest on your mortgage of Industrial purchase is tax-deductible.
2. There are no fixed rates for industrial property purchase loans. The rate of interest depends on the consent of the applicant and the lender.
3. Industrial property purchase loans have a higher interest rate than regular residential property purchase loan and commercial property purchase loan. Because, they are considered high risk for lenders.
4. Industrial property purchase loan offer better interest rates than regular business loans because they require property as collateral.
5. Loan to Value ratio for seller occupied commercial is 60% and rented commercial is 50%.
6. Property type: Industrial Self Occupied, Industrial Vacant and Industrial Rented.
7. Before funding your loan, major Banks/NBFCs/HFCs will typically require a down payment between 40-50% of the property purchase price.

Eligibility criteria for an Industrial Property Purchase Loan

The eligibility criteria for an industrial property purchase loan in India may vary depending on the lender’s policies and the borrower’s profile. However, some common eligibility criteria are:

• Age

The borrower should be at least 21 years of age at the time of loan application.

• Income

The borrower should have a steady source of income to be able to repay the loan. The minimum income requirement may vary from lender to lender.

• Credit Score

The borrower should have a good credit score, usually above 750, to be eligible for the loan. A good credit score indicates the borrower’s creditworthiness and repayment capacity.

• Employment

The borrower should have a stable employment history or a profitable business for a minimum period of 2-3 years.

• Property Details

The property being purchased should be an industrial property, such as a factory, warehouse or manufacturing unit, and should meet the lender’s criteria for valuation and legal clearance.

• Collateral

In case of a secured loan, the borrower needs to provide collateral such as the industrial property being purchased, as security against the loan.

• Other Documents

The borrower needs to submit other documents such as identity proof, address proof, income proof, bank statements, and other relevant documents as required by the lender.

Factors to consider before applying for an Industrial Property Purchase Loan

Applying for an industrial property purchase loan is a big decision that requires careful consideration of various factors. Some of the important factors to consider before applying for the loan are:

• Loan Amount

The borrower needs to evaluate the amount of loan required based on the market value of the industrial property and their financial needs. Borrowing too much may lead to higher EMIs and interest costs.

• Interest Rate

The interest rate is a crucial factor in determining the cost of the loan. Borrowers should compare the interest rates offered by different lenders and choose the one that offers the most competitive rate.

• Repayment Tenure

The repayment tenure determines the duration of the loan and the amount of EMI payable. Borrowers should choose a tenure that allows them to comfortably repay the loan without affecting their financial stability.

• Collateral Requirement

In case of a secured loan, the borrower needs to provide collateral such as the industrial property being purchased. Borrowers should evaluate the collateral requirement and the risks associated with pledging the property before applying for the loan.

• Processing Fees and Other Charges

Lenders may charge processing fees, prepayment charges, or other charges that may add to the overall cost of the loan. Borrowers should check the fee structure and understand the charges before applying for the loan.

• Eligibility Criteria

Borrowers should evaluate their eligibility criteria based on their age, income, credit score, and employment status, to avoid loan rejection and wasted efforts.

• Loan Purpose

Borrowers should have a clear purpose for availing the loan and ensure that the industrial property being purchased will generate sufficient returns to repay the loan.

Pros and cons of an Industrial Property Purchase Loan

Certainly, here’s more on the topic of industrial property purchase loans in India…

Pros of an Industrial Property Purchase Loan :-

• It can help you acquire an industrial property that you may not be able to afford otherwise.
• It provides you with the required funds to expand your business or start a new venture.
• You can avail tax benefits on the interest paid on the loan.
• You can repay the loan in convenient EMIs over a period of time.

Cons of an Industrial Property Purchase Loan :-

• The interest rates for industrial property purchase loans are higher than home loans.
• You need to pledge collateral for a secured industrial property purchase loan.
• The loan approval process can be time-consuming.
• Non-payment of EMIs can lead to the foreclosure of your property.

Top 10 Banks or HFCs that offer hassle free Industrial Property Purchase Loan

1. LIC Housing Finance Ltd.
2. HDFC Ltd.
3. ICICI Bank
4. IDFC First Ltd.
5. Tata Capital Ltd.
6. Can Fin Homes Ltd.
7. Indiabulls Housing Finance Ltd.
8. IIFL Home Finance Ltd.
9. L&T Finance
10. Aditya Birla

Required Documents for Industrial Property Purchase Loan

To apply for an Industrial Property Purchase Loan in India, borrowers need to submit certain documents to the lender. These documents may vary depending on the lender’s policies and the borrower’s profile, but some common documents required are –

Main Applicant

1.  Photo
2. Pan Card Copy
3. Aadhar Copy
4. Current Residence Proof
5. Business Registration and Business Address Proof
6. Latest 12 Months GST Return Copy
7. Latest 6 Months Bank Statement Current Account
8. Latest One Year Bank Statement of Saving Account
9. Latest 3 Years ITR with Financial
10. Running Loan Account Statement
11. Processing Fee Cheque

Co-Applicant

1. Photo
2. Pan Card Copy
3. Aadhar Copy
4. Relationship Proof with Main Applicant

Property Documents

1. Copy of Allotment Letter
2. Copy of Possession Letter
3. Copy of Transfer Memorandum
4. Ownership transfer chain from First Allottee

Note :-

• Proprietorship and partnership firms are eligible to take a mortgage loan on industrial property being used as manufacturing unit.
• The manufacturing unit can be owned by firm or individuals.
• All the owners of the property should be part of the loan structure.
• A private limited company is also eligible to take a mortgage loan on industrial property.
• All the directors and property owners have to sign the loan application as applicant or co-applicant in the loan.
• Property can be owned by either directors of the company or it can be in the name of the company.
• The property should be approved by competent authorities as industrial unit.

FAQs

What is the maximum loan amount I can get for an industrial property purchase loan ?

The maximum loan amount you can get for an industrial property purchase loan depends on various factors like your income, credit score, property value and loan tenure.

What is the interest rate for an industrial property purchase loan ?

The interest rate for an industrial property purchase loan varies from lender to lender. It usually ranges from 9% to 18%.

How long does it take to get an industrial property purchase loan approved ?

The time taken to approve an industrial property purchase loan depends on the lender’s policies and your eligibility. It usually takes 7 to 14 days.