Commercial Property Loan

How a Commercial Property Loan Works

A commercial property loan allows you to borrow money from a bank to purchase a location for your business. This could be a shop, an office, a factory, or even land if you plan to build something for your business.

The bank evaluates your eligibility for the loan, and if approved, the loan amount is deposited into your bank account. Borrowers then start repaying the loan through equated monthly instalments (EMIs). You can estimate your monthly payments using a home loan EMI calculator before applying. This is how a commercial property loan functions –

• Selection: You identify a commercial unit, shop, or office.
• Appraisal: The bank evaluates your business’s creditworthiness and the property’s legal standing.
• Funding: Most lenders provide loans to buy business property, covering 60% to 75% of the market value.
• Repayment: You pay back the principal plus interest over a fixed term, typically 15 or 20 years.

Features of Commercial Property Loan

These are the features of a commercial property Loan:

• High Loan Quantum: Borrowers can get loans from ₹10 lakh to over ₹15 crore, depending on their income profile.
• Long Tenure: These loans offer repayment tenure of up to 20 years.
• Dual Advantage: You can use the property for your own business or rent it out to generate passive income.
• Capital Preservation: Keep your cash reserves available for inventory, marketing, and day-to-day operations.

Fees & Charges of Commercial Property Loan

Aside from the interest rate, certain fees must be incurred with a commercial property loan. These have been tabulated below –

In case of early repayment, borrowers can estimate interest savings using a home loan prepayment calculator.

Comparison of Lenders for Commercial Property Loan

When selecting the best bank for a commercial property loan, it’s important to carefully evaluate factors such as interest rates, processing fees, and loan tenure. These loans generally have higher interest rates than residential financing. You can check the latest home loan interest rate to understand how they differ.

Here is the verified comparison from major lenders:

Borrowers can use a home loan EMI calculator to estimate their monthly repayment before selecting a lender.

Eligibility Criteria of Commercial Property Loan

The eligibility criteria closely resemble those for home loans, with the key distinction that self-employed borrowers must have a consistent operational history.

• Occupation: Salaried professional, a self-employed individual, or someone who runs a business.
• Age: Between 21 and 70 years (loan to be repaid by retirement age).
• CIBIL Score: A score of 700 and above is preferred.
• Business Vintage: Self-employed applicants usually need at least 3 to 5 years of consistent operational history.

Borrowers can evaluate their borrowing capacity using a home loan eligibility calculator before applying for a loan.

Documents Required for Commercial Property Loan

These are the documents required for a commercial property loan; they differ from those for a home loan application.

• Identity & Address: PAN, Aadhaar, Passport.
• Property Papers: Title deeds, approved blueprint, and tax receipts.
• For Salaried: Last 3 months’ salary slips and 6 months’ bank statements. Form 16 or ITR for the last 2 years.
• For Self-Employed: Audited financials (P&L, Balance Sheet) for 2-3 years. Business proof (GST registration, Partnership deed).

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