Ever considered leveraging property for liquidity without having to sell it? A loan against property (LAP) allows you to do just that. For borrowers, this financial option is a powerful tool—whether you’re looking to expand your business, fund a luxury purchase, or make a substantial investment.
By using your residential, commercial, or industrial property as collateral, you can access large loan amounts at competitive interest rates. This flexibility provides quick financial access for high-value goals, all while allowing you to retain ownership of your valuable assets.
According to the Reserve Bank of India data, the demand for loan against property has steadily risen due to the lower interest rates when compared to unsecured loans. In fact, the average loan against property interest rate is typically lower than personal loans, making it an appealing choice for those seeking cost-effective borrowing options.
While we’ve covered what is loan against property, for those looking to capitalise on their assets, here’s why a loan against property is a smart move:
Leveraging Property for Liquidity Without Selling It
For individuals, holding onto valuable properties is part of long-term wealth-building strategies. Loans against property offer a way to capitalise on passive assets while maintaining ownership.
Quick Financial Access for High-Value Goals
When an individual or business needs quick access to capital, whether to fuel business growth or invest in real estate, an instant loan against property is an effective solution that provides high-value liquidity without high interest rates.
Loans Against Property: A Closer Look
Loans against property come with several distinctive features that are tailored to meet the needs of borrowers. These include the ability to secure high loan amounts based on property value, flexible tenure options (ranging from short to long-term), and a variety of acceptable property types. Additionally, loans against properties offer competitive interest rates and diverse repayment options, including fixed and floating rates.
High Loan Amounts
Borrowers benefit from loan against property amounts as high as 50%-70% of the market value of their property. For luxury estates, commercial properties, and niche real estate, this means a substantial loan size, providing significant leverage for personal or business growth.
Flexible Tenure
A loan against property offers flexibility in repayment terms, ranging from 2 to 10 years, depending on the borrower’s financial goals. Whether you want to manage short-term liquidity or require a long-term repayment option, this flexibility allows borrowers to optimise cash flow efficiently.
Property Types
You can get a loan against a range of property types, such as:
- Residential Properties: Luxury homes, vacation estates, high-value apartments
- Commercial Properties: Office spaces, retail complexes, and industrial real estate
- Niche Categories: Ultra-high-value properties, including estates, villas, and vacation homes
Irrespective of the type of property, borrowers can get a loan against property without being limited to conventional property types.
Interest Rates
The loan against property interest rate is typically lower than other unsecured loans like personal loans, making it a cost-efficient option for borrowers. Most firms providing loans against property offer interest rates between 9% and 12% per annum. Borrowers have the advantage of negotiating better terms due to their strong credit profiles. One can also choose between fixed and floating rates. While fixed-rate loans offer predictability, many borrowers prefer floating rates, as they can capitalise on fluctuating market conditions.
Loan-to-Value (LTV) Ratio
The loan-to-value ratio for home loan against property or commercial real estate is usually between 50%-70%.
Repayment Options
Tailored repayment options, such as bullet payments or interest-only EMI options, allow borrowers to choose repayment structures that align with their financial planning. These options provide flexibility and help manage cash flow more effectively, especially in cases of fluctuating income.
Connect with our team at RURASH Financial to know if a loan against property is right for you
Benefits of Loans Against Property with RURASH Financial
A loan against property offers multiple benefits, particularly for those with significant real estate assets. It offers liquidity without having to sell valuable properties, lower interest rates compared to unsecured loans, flexible tenure and repayment, and flexible usage of the loan amount. Moreover, it can be a valuable tool for tax benefits and wealth planning.
Capitalising on Assets
Most high-net-worth individuals own high-value properties that may not generate consistent cash flow. A loan against property turns these assets into liquid cash, allowing the owners to unlock their full value without selling them.
Lower Interest Rates Compared to Personal Loans
Compared to unsecured loans, a loan against property with RURASH Financial offers much lower interest rates. For high-value loans, this becomes a crucial factor in cost efficiency, helping save significantly on interest payments.
Flexible Tenure and Repayment Options
At RURASH Financials, we offer flexible tenure starting from 2 years and ranging up to 10 years along with the facility of part repayment at minimal charges. Due to flexible tenure, borrowers can distribute the owed loan amount to reduce EMI. Additionally, our loans against property have low to nil prepayment and foreclosure charges.
Virtual Process to Make Availing the Loan Convenient
Loans against property are made convenient with our team seamlessly managing documentation and the entire process of availing the loan. Borrowers can also check the necessary details on an online portal where the entire process is carried out virtually.
Easy Access to Affordable and High-Value Loans
The right financial firm can offer flexible loan options against your property, depending on its market value and other significant factors. At RURASH Financial, borrowers can opt for affordable and high-value loans up to Rs. 3 Crore for self-employed individuals and 1 crore for salaried individuals. With simple eligibility criteria and a limited list of documentation, applying for LAP and getting approval is a short and simple process.
Flexible Use of Loan Proceeds
One of the best advantages of loans against property is the freedom in how the loan can be used. From investing in businesses, buying additional real estate, or managing personal financial growth, borrowers have the freedom to utilise the loan proceeds for myriad purposes.
Tax Benefits
For business owners, there may be tax deductions available on the interest paid towards a loan against property. When the loan is used for business purposes, these deductions can provide significant tax relief, especially for large loan amounts.
Wealth Planning Tool
Borrowers often use a loan against property as part of their larger wealth management strategy. By using a property for liquidity, they can diversify investments, ensure liquidity for future generations, or fund large personal or professional projects.
With a consultation from our experts at RURASH Financial, you can get a more tailored view of how a loan against property can benefit you.
Sources of Data
- Reserve Bank of India for interest rate guidelines: RBI LAP Guidelines.
- HDFC Bank LAP Products: HDFC Loans Against Property.
- ICICI Bank LAP Overview: ICICI Loans Against Property.
- Moneycontrol – LAP Interest Rates Overview: LAP Interest Rates.
How to Get a Loan Against Property
Obtaining a loan against property involves several steps, including meeting eligibility criteria, preparing required documentation, and navigating the application process. Financial aggregators play a crucial role in streamlining this process to ensure that property valuation and approval are handled efficiently to expedite loan disbursement. If you have considered looking up how to get a loan against property, here’s a simpler overview:
Who Can Apply?
- Salaried employees
- Self-employed individuals
- Business owners
Eligibility Criteria
When applying for a loan against property, meeting the eligibility criteria is key. Lenders evaluate applicants based on several factors:
- Minimum Property Value: The property is expected to be of significant value, often starting from ₹50 lakh or more.
- Income Level: Borrowers
- Credit Score: A high credit score, typically 750 or above, is crucial. It reflects the borrower’s credibility and can help secure a favourable loan against property interest rate.
Documents Required to Get a Loan Against Property
For individuals seeking a personal loan against property, documentation ensures transparency and quick processing. Listed below are some commonly required documents.
For Salaried Employees
- Documents of the property that the borrower wants mortgaged
- Income tax returns
- Account statement of the last 3 months
- Latest salary slip
- Address proof such as Aadhar card, voter ID utility bill passport ration card, or any other government-issued document
- 2 Passport-sized photographs
- Identity proof such as Aadhar card, voter ID, passport, PAN card.
Documents Required for Self-Employed Individuals or Business Owners
- KYC documents like Aadhar, PAN, passport, voter
- Proof of residence through documents like utility bills, Aadhar, PAN, voter ID
- Property papers of the property to be held as collateral such as title deeds, sale agreements, and property tax receipts.
- Income proof such as profit and loss statements or balance sheets.
- Income tax returns for the last three years.
Application Process
Applying for a loan against property typically involves the following steps:
- Initial Consultation: Get an initial consultation with the team at RURASH Financial to check whether you are eligible for a loan against property.
- Submit Documents: Fill out the required details and provide the necessary documents, including property details and income proof.
- Property Valuation: Get your property assessed to be pledged as collateral.
- Loan Offer: Based on the property value, income, and credit score, we confirm the loan amount and terms.
- Loan Disbursement: Upon approval, the funds are disbursed directly to your account within 7-15 business days.
Rurash Financial streamlines this process, making it simpler by managing documentation, valuation, and negotiations to help you secure favourable terms.
Property Valuation
The property valuation process involves:
- Market Value Assessment: Lenders hire independent evaluators to assess the current market value of the property.
- Location and Type: Properties in prime locations or commercial hubs often fetch higher valuations, allowing borrowers to secure larger loans.
- Market Fluctuations: Property value is subject to fluctuations. A sudden drop in market value can reduce the loan eligibility.
Types of Loans Against Property
Loans against property can be categorised into several types based on the property involved. These include residential property loans, commercial property loans, and specialised loans for high-value properties like estates and vacation homes.
Residential Property Loans
Individuals who own real estate can use residential properties as collateral. These loans allow borrowers to leverage family homes, vacation houses, and other personal properties to gain capital for personal or business goals.
Commercial Property Loans
For individuals with commercial real estate, a loan against property allows the convenience to raise capital without selling any assets. These properties include office buildings, industrial spaces, and retail properties that can be used as collateral to secure loans for business expansion or investments.
Loans Against High-Value Properties
Many individuals own vacation homes and properties with significant value. These properties qualify for high loan amounts due to their market value. When it comes to availing loans against these high-value properties, financial aggregators like RURASH Financial offer customised solutions at low interest rates and with flexible repayment options.
Risks & Challenges of Loans Against Property
While a loan against property offers substantial benefits, it also comes with risks and challenges. These include potential impacts from market fluctuations on property value, the variability of interest rate, etc. which can affect long-term repayment amounts. Understanding these risks is crucial for effective management of loans against properties.
Market Fluctuations
Real estate markets are prone to fluctuations, which can impact both the loan against property interest rate and the loan amount. If property prices drop significantly, borrowers may face challenges when it is time to renew or extend the loan terms.
Risk of Foreclosure
A significant risk with a loan against property is the risk of losing property in case of default. If the loan is not repaid according to the pre-approved terms, the lender has the legal right to foreclose and sell the property to recover the outstanding amount. To mitigate this risk, one should ensure a stable income stream and negotiate with lenders for flexible repayment terms beforehand.
Interest Rate Risks
Loans against properties can be availed at either fixed or floating interest rates. A floating rate means that the loan against property interest rate could change during the tenure of the loan. If the interest rate rises, it can increase the monthly EMIs, leading to cash flow disruptions.
Liquidity Challenges
While loan against property offers liquidity, it can be challenging if the real estate market takes a turn for the worse. Any fall in property value could make it difficult for a borrower to extend the loan, refinance, or sell the property.
Sources of Data
- Reserve Bank of India: Guidelines on loans and property valuation RBI Loans Guidelines.
- HDFC Bank: LAP product features and eligibility HDFC Loans Against Property.
- ICICI Bank: Detailed LAP offerings for NRIs and HNIs ICICI LAP for NRIs.
- Economic Times: Analysis of LAP market and interest rates Economic Times LAP Overview.
Comparing Loans Against Property with Other Loan Types
When considering a loan against property, it’s essential to compare it with other financing options such as personal loans and loans against securities. Each option has its own advantages and limitations, and understanding these can help in making an informed decision based on individual financial needs.
Loan against property vs. Personal loan
When considering a loan against property versus a personal loan against property, several factors make LAP the preferred choice.
- Loan Amount: Loans against property generally offer much higher loan amounts compared to personal loans. With a loan against property, borrowers can secure up to 50%-70% of the property’s value, while personal loans usually have lower limits.
- Interest Rates: The loan against property interest rate is typically lower than that of personal loans. This makes loans against properties more cost-effective for large sums.
- Repayment Terms: Loans against property provide flexible repayment terms ranging from 5 to 15 years, unlike personal loans which often have shorter repayment periods.
- Purpose: While personal loans are generally used for immediate expenses, loans against properties are suited for significant financial goals, such as business expansion or real estate investments.
Loan against property vs. Loans against securities
Choosing between a loan against property and a loan against securities involves evaluating several key factors:
- Collateral: Loan against property uses real estate as collateral, whereas loans against securities use financial assets such as stocks or bonds.
- Loan Amount: Loans against property typically offer higher loan amounts compared to securities-based loans, especially if the property is high-value.
- Interest Rates: Both types of loans generally offer competitive interest rates, but loans against property may offer lower rates compared to loans against volatile securities.
- Flexibility and Risk: Loans against property offer stability and less risk compared to securities-based loans, which can be frequently affected by market fluctuations.
Expert Tips for Managing Loans Against Property
To effectively manage a loan against property, it’s important to understand the terms and conditions, stay informed about real estate market trends, and diversify repayment strategies. Here are some tips to seamlessly manage loans against property.
Understand the Terms
Before finalising a loan against property, thoroughly review the loan agreement. Pay close attention to:
- Hidden Fees: Check for any additional costs such as processing fees or administrative charges.
- Foreclosure Charges: Understand the penalties for early repayment or pre-closure.
- Interest Recalculations: Be aware of how and when the interest rate might change, especially for floating-rate loans.
Monitor Real Estate Trends
Staying informed about real estate market trends can help you make strategic decisions about your loan against property. Fluctuations in property values can impact your loan terms and repayment strategy. These fluctuations could be due to a change in the interest rate, a significant drop in the property value, etc., which can also pose a challenge if one intends to renew or extend the loan.
Diversify Loan Repayment Strategies
To manage your home loan against property effectively, find out the potential repayment models and whether you can . Some of the options include:
- Equated Monthly Instalments (EMIs): Regular monthly payments that include principal and interest.
- Bullet Payments: Paying interest during the tenure with a lump sum principal payment at the end.
Leverage Multiple Properties
Borrowers with multiple high-value properties can use them to negotiate better loan terms. By offering multiple assets as collateral, you can secure higher loan amounts and potentially better interest rates.
Sources of Data
- Reserve Bank of India: Guidelines on loans and property valuation RBI Guidelines.
- HDFC Bank: Information on LAP products and features HDFC LAP Products.
- ICICI Bank: Comparison of LAP and other loan types ICICI Bank LAP.
- Moneycontrol: Analysis and updates on LAP and interest rates Moneycontrol LAP Overview.
Summing It Up
Loans against property offer a strategic financial solution to access substantial funds while retaining ownership of assets. They provide flexibility, competitive interest rates, and the ability to leverage real estate for diverse financial goals.
Borrowers can consider loans against property for their ability to provide large credit amounts at lower rates. Whether your need is to finance investments or take care of personal needs, leveraging property can be an efficient tool.
For a tailored financial strategy or to apply for a loan against property, consult with our experts at RURASH Financial today. We offer customised solutions to help you achieve your financial goals efficiently.
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Features & Benefits
- Affordable and high-value loans up to Rs. 3 Crore for self-employed individuals and 1 crore for salaried individuals
- Borrowers can easily check the necessary details on an online portal and the entire process is easily carried out virtually.
- Flexible tenure starting from 2 years and ranging up to 10 years along with the facility of part repayment at minimal charges
- Minimal eligibility criteria and documentation
- With a simple eligibility criteria and a limited list of documentation, applying for LAP and getting approval is a short and simple process.
- Low EMI
- Due to flexible tenure, borrowers can distribute the owed loan amount to reduce EMI.
- Lower Rate of Interest and processing fee.
- As compared to personal loans and unsecured loans, LAP offers lower interest rates which make LAP affordable.
- Low to Nil Prepayment and Foreclosure Charges
- If borrowers decide to prepay the loan, they don’t have to bear any prepayment charges. Even if they do, it’s negligible.
Process To Apply For Loan Against Property
- Check whether you are eligible for a Loan Against Property.
- Fill out the required details.
- Pledge your property as collateral.
- Check your bank for the credited loan amount.
Who can apply?
- Salaried employees
- Self-employed individuals
- Business owners
Documents Required For Salaried Employees:
- Documents of the property the borrower wants to be mortgaged
- Income tax returns
- Account statement of the last 3 months
- Latest salary slip
- Address proof such as Aadhar card, voter ID utility bill passport ration card, or any other government-issued document
- 2 Passport size Photographs
- Identity proof such as Aadhar card, voter ID, passport, PAN card.
Who can apply?
- Address proof such as Aadhar card, voter ID utility bill passport ration card, or any other government-issued document
- Identity proof such as Aadhar card, voter ID, passport, PAN card
- Documents of the property the borrower wants to be mortgaged
- Account statement of the last 6 months
- Last three years audited financials
FAQ's
Typically, the processing time for an instant loan against property can range from 7 to 15 business days.
Yes, you can avail a loan against property on a joint property. Both co-owners need to be involved in the application process and must meet the eligibility criteria.
Most financial firms offer loans against property to NRIs who meet the eligibility criteria.
A home loan against property and a home equity loan both leverage real estate. However, they differ in loan structure, interest rates, and loan usage.
Absolutely. You can continue using the property (whether residential or commercial) even after pledging it as collateral.
The loan amount is directly tied to the current market value of your property. Additionally, factors like location, condition, and demand can significantly impact the valuation.
Common charges include processing fees, administrative fees, legal fees for property evaluation, and stamp duty.
Yes, it is possible to take a loan against property even if it has an existing mortgage. This process is called a top-up loan, but the combined loan amount (existing mortgage + new loan) must not exceed the lender’s loan-to-value (LTV) ratio.
If your property’s market value appreciates significantly during the loan tenure, you can approach your lender for a top-up loan or renegotiate your loan terms for a better interest rate or higher loan amount.
Yes, you can, as long as the ownership is legally transferred to your name. Lenders will require all legal documents to verify ownership before sanctioning the loan.
While insurance is not always mandatory, lenders may recommend taking insurance to cover both the property and your life. This ensures that, in case of unforeseen circumstances, the outstanding loan amount is covered.
If you wish to sell the property while it’s mortgaged, you must first repay the outstanding loan amount. The lender will release the property’s title deed once the loan is fully settled, allowing you to proceed with the sale.
Borrowers often have room to negotiate their loan against property interest rates and terms. Lenders may offer preferential terms based on your credit history, income level, and the property’s value.
Got more queries? Our team of experts is here to guide you through every step, ensuring you get the best terms on your loan against property. With years of experience, we know how to navigate the fine print, avoid common pitfalls, and secure a deal that truly works for you.
Whether you’re looking to expand your business, invest, or simply free up capital, we’ll make sure the process is smooth, hassle-free, and tailored to your needs. Reach out today to explore how we can help you make the most of your property.
LAP as we call it is a secured loan against residential or commercial property. These loans are usually offered at a lower interest rate as compared to a personal loan or business loan. Banks, housing finance companies and NBFCs are the major providers for loans against property.
Flats, common apartment, residential house or any other self-occupied residential property
Office buildings, malls, shops, complexes, and other constructed commercial property
No, it’s important to insure the property to be used as collateral. Moreover, the insurance cover has to provide protection against calamity and fire-caused damages.
Borrowers can get up to 55% off the commercial properties market value and 60% of the residential properties market value. But it is advisable to speak to a customer representative since conditions are applied.
The repayment period usually commences the very next month after the loan disbursal month. However, you should speak to the customer care representative for full details.
The loan eligibility is calculated based on the borrower’s repayment capacity. That depends on factors like age qualification income, co-applicant’s income, and others.
No, borrowers do not get any tax deduction for a LAP. As per regulations, GST will also be charged as applicable.
Serves as an option for multi-purpose usages such as business expansion, child education, personal expenses like vacations or weddings, or a medical emergency
Lower interest rates compared with personal or other types of loans.
Offers tax benefit under section 37 (1) of the income tax act 1961
Ensures maximum utilization of property by allowing borrowers to avail loans up to 50-70% of the value of the property
Ownership of your property remains with the borrower
Quick approval process
Prompt disbursement
Easier process for foreclosure.
The loan amount is typically based on the loan against property interest rate and the property’s market value. Lenders usually offer 50%-70% of the property’s assessed value.
Yes, you can use the loan for a variety of purposes, including overseas investments. However, ensure that the loan terms and conditions permit this usage.
If the property value decreases significantly, it may affect the possibility of refinancing or extending the loan. Regular monitoring of property values can help manage this risk.
Yes, it is possible to transfer your loan against property to another lender. This is often done to benefit from better terms or interest rates.
