Loan Against Property for Your Financial Needs

Loan Against Property (LAP) is a type of secured loan provided against the security of a property legally owned by the applicant. This property can be either residential or commercial, and its market value determines the potential loan amount that will be granted to the borrower. From a cost perspective, these loans can be a better option as compared to a personal loan due to the comparatively lower rate of interest charged by the lenders.

Along with being cost-effective, these loans are reasonably convenient to avail and repay due to the relatively low interest rates. Bridge the gap between your dreams and financial need by applying for Loan Against Property with

Types of Loans against Property

Based on the type of property pledged, Loans against Property can be classified as:

  • Loans against self-occupied residential property
  • Loans against vacant residential property
  • Loans against rented residential property
  • Loans against self-occupied commercial property
  • Loans against vacant commercial property
  • Loans against rented commercial property
  • Loans against residential plot
  • Loans against industrial property

Loan against property is a multi-purpose loan which can be used for a variety of financial needs such as medical expenses, travel, wedding expenses, higher education for children, business expansion, home improvement, and more. Typically lenders are willing to offer 50%- 60% of the value of the property as loan. However, depending on the type of property, the funding ratio may vary:

For residential, self-occupied property, the funding percentage is usually 65%. If the residential property is rented, then 60% of the property value can be availed. Similarly, for commercial, self-occupied property, 55% is the funding ratio and for commercial properties that are let out for rent, lenders will typically advance 50%. Funding against residential plots is normally 60% of value, whereas for commercial plots the funding is approximately 50% of value. Remember, LAP is not granted for purposes such as gambling, speculative business investments, stock market investment, or other similar purposes.

What kind of property is considered for Loan against Property?

Any registered property with the proper sanctions from the appropriate town planning authority is considered suitable for LAP. General Power of Attorney (GPA) holders of a property cannot apply for LAP, because a power of attorney is not the same as legal ownership. Therefore, lenders do not give loans to GPA holders. Similarly, most lenders do not grant LAP for agricultural lands because these lands are solely meant for agricultural purposes. Here’s a list of properties for which LAP is usually granted:

  • Residential properties owned by applicant
  • Residential properties owned as well as occupied by applicant
  • Residential properties owned by applicant but let out for rent
  • Piece of land owned by applicant
  • Commercial property owned by applicant
  • Commercial property owned by applicant but let out for rent

Loan Against Property Explained

Multi-purpose Loan

The funds obtained from LAP can be used for a variety of purposes ranging from wedding or vacation to business expansion or medical expenses. The property pledged as collateral is evaluated by a property appraiser approved by the prospective lender.

Loan Range

LAP is most suitable when the amount of loan required is very high. This type of loan ranges in size from 2-3 Lakhs up to 2-3 Crores. The actual loan amount depends on various criteria meant to measure your repayment capacity such as income, age, qualification, number of dependents, spouse’s income and credit history. The amount of loan that can be availed also depends on the value of the pledged property. Usually up to 40%-60% of the property value is granted as loan.

Fast-track approval process

Quick and hassle free process of Loan against Property with speedy approvals. The property documents remain with the lender as security until the loan principal and interest are completely paid off.

Secured Long-term Loans

In the case of a Loan Against Property, financial institutions offer higher loan amounts available for longer tenures and at attractive rates. A Loan Against Property also has a smaller EMI as compared to other loans.

Floating Interest rates

A floating or adjustable interest rate is not fixed and this type of interest rate varies according to interest rates in the prevailing rate market.

Eligibility Criteria

The acceptable age range for borrowers starts at 21 years and goes up to 60 years for salaried employees. For self-employed borrowers, the maximum age to qualify is 65 years.

Benefits of Loan Against Property

The immense popularity of Loans Against Property can be attributed to its multiple benefits:

  • It is a convenient type of loan that can be used for a variety of purposes.
  • It is most suitable for large funding requirements. Most banks provide Loans Against Property to the extent of ₹ 3 crores, depending on the value of the property.
  • The processing time is less than that of home loan applications.
  • Loans can be availed against both residential and commercial property.
  • The longer tenure of LAP allows easier repayment through smaller EMIs, which means minimal monthly burden.
  • It is ideal for large funding within a short span of time.
  • Borrowers continue to be the owners of the property they have pledged for collateral to the loan. So in case of inability to repay, they can sell the property and repay the loan.

Loan against Property vs. Personal Loan

When compared to a personal loan, LAP can be a better option for a number of reasons:

  • Since LAP is a type of secured loan, getting an approval is easier than for a personal loan, provided you have a good CIBIL score.
  • Interest rates on LAPs are much lower than rates on personal loans. LAP comes with the second best interest rates after home loans.
  • While personal loans are given for shorter tenures ranging from 3-5 years, the repayment tenure for LAP is usually longer, ranging from 15-20 years.
  • Since the repayment term is longer, the EMI is also lower compared to those of personal loans. This makes LAP most suitable for those who cannot or prefer not to make high monthly payments.
  • The processing fees on LAP are also lower than those of personal loans.
  • While personal loans are limited to smaller amounts, LAP can be availed for much higher loan amounts, depending on the value of the property pledged.

Get Financing for Loan Against Property


Documentation required for applicants

Documentation required for Loan Against Property

  • LAP Online Application
  • Identity proof, which may be the applicant’s PAN Card / Passport / Driving license / Aadhaar Card
  • Residence proof, which may be the applicant’s Voter ID / Electricity bill / Telephone bill / Property tax receipt
  • Bank statements of the last 6 months
  • Cheque for processing fee
  • Identification of signature from present bankers

Apart from these, other documents supporting proof of income that need to be produced by the applicant are:

  • Latest salary slips
  • Certificate and proof of business
  • Income tax returns of the past 3 years for salaried as well as self-employed applicants
  • Profit and loss statement and balance sheet for the past 3 years, for self-employed applicants

Who Can Apply for a Loan against Property?

The primary requirement for LAP is that the applicant should be the legal owner of the property to be mortgaged. Besides this, there are other eligibility criteria which differ from one lender to another. However, below are some of the common requirements that have to be fulfilled to be eligible for LAP:

  • Salaried employees between 21 and 60 years of age can apply
  • For Self-employed individuals the maximum age to qualify is 65 years
  • Professionals such as Doctors, Engineers, Architects, and Chartered Accountants are also eligible
  • A good CIBIL score is also one of the primary requirements
  • Applicant’s monthly income, other liabilities and savings are also considered by the lender before approval

Frequently Asked Questions

Loan against Property is a loan given or disbursed against the mortgage of property. The loan is given as a certain percentage of the property's market value.

You can avail the loan against the following properties:

  • Commercial Property
  • Residential Property
  • Plot
  • Lease Rental Discounting

Once your application is submitted, approval normally takes between 10 and 30 days.

The value of the property would be determined through a valuation conducted by the Loan Provider.

The difference between a Home Loan and a Loan against Property is that a Home Loan is taken only for the purpose of buying a residential property whereas a Loan against Property can be taken for any purpose.

Yes the property has to be insured against fire, flood, earthquakes and other appropriate hazards during the tenor of the loan.

Yes, you may repay the loan anytime. Some banks charge prepayment penalties that are outlined in the loan agreements. We help you sort all of this out while choosing a loan.

Yes. NRIs can get Loan against Property from most leading lenders in India. Except for the requirement of some additional documents such as passport, visa, and work permit, the process of applying for LAP is the same for both NRI and Indian applicants.

Yes. You can apply for LAP jointly with your spouse, provided he/she is the co-owner of the property.

No, there are no tax benefits for Loan against Property. However, if the amount obtained from LAP is used for business expansion, the interest paid, documentation charges, and processing fees can be claimed as business expenses under Section 37(1) of the Income Tax Act. But, if the funds are being used for personal expenses such as a wedding, or a child’s education, no benefits can be claimed under the tax laws.

  • Ease of application:  Most lenders now process loan applications online. So borrowers need not make multiple visits to the bank.
  • Loan processing time:  Some lenders take a long time to process the loan application. This means a long wait period. So it is important to look for quicker processing time.
  • Processing fee:  This varies from one lender to another. Choosing one with a lower percentage can help save money.
  • Other charges:  It is important to check if there are any prepayment penalties or early settlement charges for the loan. While some lenders charge these penalties, there are others who don’t.

The loan amount granted for LAP would depend on the type and value of the property being pledged. However, in general most lenders provide LAP for amounts ranging from a few lakhs to 2 or 3 crores.

Some of the factors considered by lenders for sanctioning LAP are:

  • Market value of the property being pledged
  • Relevant approvals and title deeds of the property
  • Age of the property
  • Applicant’s legal ownership of the property
  • Age of the applicant
  • Number of dependents
  • Other debts and liabilities of the applicant
  • Applicant’s CIBIL score and credit history
  • Financial strength of the applicant, income and repayment capability

As with any other type of loan, most lenders provide an online EMI calculator on their website, which allows you to calculate the monthly payment applicable for Loan against Property. To manually calculate the EMI, apply the following mathematical formula:

EMI = [P x R (1+R) N]/ [(1+R) N-1]

Where P is the principal amount, or the total amount of loan availed, R is the rate of interest on the loan, and N is the tenure of the loan represented in months.

Yes. You can avail LAP even if you have other existing loans provided you meet all other eligibility criteria of income, age, employment, credit score etc.

The lender conducts a formal evaluation, wherein an appraiser approved by the lender, visits your property to assess it and determine its market value.

Since LAP is a multi-purpose loan, most lenders do not require you to specify the purpose of the loan up to a certain amount. However, if the amount borrowed is beyond a particular limit, you may be asked to sign a declaration that the funds are not being used for any speculative or illegal purposes.

In general most lenders charge a processing fee of 0.5-1% for Loan against Property. Besides this, there is usually a mortgage origination fee of ₹ 5000. In the event of a foreclosure, charges are applicable at 4%, and for prepayment 2%-2.5% is charged. Besides these, cheque bounce charges, or charges for late payment of EMI may be applicable, and these charges vary from one lender to another.

Yes, interest rates of LAP are lower than those on personal loans because LAP is a type of secured loan, which means lower risk to the lender.

Four important factors that determine the interest rate offered by the lender for Loan against Property are:

  • Your individual profile, which includes your age, occupation, income, debts and other liabilities, etc.
  • Your credit history, including your credit score, past debts, and loan repayment behavior
  • The type of property you pledge as collateral
  • The repayment tenure you choose for your loan

Not all applications for LAP get approved. Some common reasons for rejection include:

  • Non-fulfillment of one or more of the eligibility criteria
  • Unstable employment
  • Insufficient income or excessive other debts and liabilities
  • Poor credit score or unsatisfactory credit history
  • Absence of required government approvals
  • Low property value