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Loan Against property

Loan Against Property is a multi-purpose loan that can be availed whether you are starting a new business or require long term working capital or need to fund education or marriage of your children. You can opt for a loan against fully constructed houses as well as residential and commercial properties.

Features of Loan Against Property

  • It is noteworthy the property is not necessary to be a constructional structure. Your property can be your land also.
  • Flexible Tenor – Salaried individuals can select a tenor ranging from 2 to 20 years and repay the loan conveniently. Self-employed individuals can select a tenor of up to 18 years to repay the loan. You can part-prepay or prepay your loan anytime at minimal charges.
  • Attractive interest rates
  • Tenure upto 15 years
  • Loan against commercial / residential property

Eligibility

Who is eligible for a loan against property?

Parameters Salaried Self Employed Professionals Self Employed Non Professionals (Indviduals) Non Individuals
Segment Working in MNC / Public Ltd. Co/ Large Pvt. Ltd. Co./State Govt/ Central Govt. / PSU Doctors, Architects, Chartered Accountants Traders, Retailers and wholesalers Firm, Pvt Ltd , Public
Age Minimum- 25 Years
Maximum- 60 Years at loan maturity		 Minimum- 25 Years
Maximum- 60 Years at loan maturity		 Minimum- 25 Years
Maximum- 60 Years at loan maturity		 N/A
Income p.a. Rs 2,40,000 Rs 2,50,000 Rs 2,50,000 Rs 3,00,000
Occupational Stability Minimum 3 Years Minimum 3 Years Minimum 3 Years Minimum 3 Years ( with 2 years cash profit)

Individuals who are eligible for a loan against property:

Salaried individuals
  • Any individual who is in permanent service in the government or a reputed company
  • The applicant should be above 24 years of age at the time of loan commencement and upto the age of superannuation
Self-employed individuals
  • Any individual filing Income Tax returns can apply
  • The applicant should be above 24 years of age at the time of loan commencement and upto 65 years at the time of maturity
Self Employed Professionals
  • Professionals (ie, doctors, engineers, dentists, architects, chartered accountants, cost accountants, company secretary, and management consultants only) can apply
  • The applicant should be above 24 years of age at the time of loan commencement and up to 65 years or less at the time of loan maturity
Lease Rental Discounting (LRD)
  • All resident individuals can apply. The lessee must however be a company as defined under the Companies Act, 1956.
  • Funding will be done only against ready commercial property. The same will be restricted to 85% of the net present value of the future rentals or 50% of the value of property, whichever is lower.
Loan Amount
You can avail Loans ranging from Rs. 5 Lakhs to Rs. 5 Crores
Check our borrowing limits
Minimum Limit – Rs. 5,00,000
Maximum Limit – Rs. 5,00,00,000 (based on Product/Variant categorisation)
20%-30% margin in case of purchase of commercial property
40%-55% margin in case of loan against residential/commercial property
Tenure
The maximum term of your loan can be up to 15 years.

Interest Rates

The interest ranges between 11-16.45% by various bank / NBFC

Documents Required

Purpose Documents
Proof of both identity and residence (any 1)
  1. Valid Passport
  2. Voter ID Card
  3. Aadhaar Card
  4. Valid Driving Licence
Proof of income
  1. Last 3 months’ Salary Slips
  2. Last 6 months’ Bank Statements, showing salary credits
  3. Latest Form-16 and IT returns
Other documents
  1. Employment Contract / Appointment Letter in case current employment is less than 1 year old
  2. Last 6 months’ Bank Statements showing repayment of any ongoing loans
  3. Passport size photograph of all the applicants / co-applicants to be affixed on the Application Form and signed across
  4. Cheque for processing fee favouring ‘HDFC Ltd.’
  5. Declaration and documents clearly stating the end use of the loan
  6. Own Contribution Proof
Property related documents
  1. Title Deeds including the previous chain of the property documents
  2. Proof of no encumbrances on the property
  3. Approved plan if applicable
Frequently Asked Questions
What are the end use of a Loan Against Property?

You can use a Loan Against Property to fulfil all your financial obligations.

  • For self-employed, you can use your loan for the following purposes:• Business expansion
    • Operation usage
    • Debt reconciliation
    • Purchasing raw materials
    • Making new investments and personal useFor a salaried individual, you can use your loan for the following purposes:• Mortgage buyout/Balance Transfer of existing loan
    • Consolidation of debt
    • Managing wedding expenses
    • New investments
    • Financing education

How is my eligibility for a Loan Against Property calculated?

  • The eligibility of a Loan Against Property is calculated by taking into the following parameters in account:• Age
    • Income
    • Property value
    • Existing obligations, if any
    • Stability/Continuity of employment/Business
    • Past borrowing track record

Do I need insurance for the property for which I want to avail a Loan Against Property?

Yes, your property needs to be insured for fire and other calamities during the tenor of your loan. You will have to provide proof of insurance to Bank / NBFC where you have obtained loan.

What criteria does my property need to fulfil for me to avail a Loan Against Property?

You need to ensure that the title of the property is clear, free of any litigation, and should not have an existing mortgage or loan.

Can I avail a Loan Against Property for a property that is owned by my relatives and me?Yes, you can. All the co-owners of the property will be considered as co-applicants of the loan.

What is the sanctioning and disbursement process of a Loan Against Property?The process Loan Against Property disbursement is as follows:
Submission of documents – You’ll have to submit a set of documents depending on your loan application documents you’ve handed in.
Sanctioning of Loan – Your credit worthiness is calculated based on your income, age, employer or firm with whom you work, and CIBIL report. If you are self-employed then your nature of work, bank statements, and CIBIL report, and then plans out the maximum loan amount that Bank / NBFC can offer you. You are then issued a Loan Sanction Letter.
Acceptance of Loan – If you agree with the terms and conditions of the loan, you will have to submit a signed duplicate copy of Loan Sanction Letter.
Disbursement of Loan – The loan will be disbursed once all relevant papers of the property have been verified, all pertinent documents have been submitted, and the loan agreement has been executed.

How will my Equated Monthly Instalment (EMI) be calculated?Your EMI consists of two parts—paying back the principal amount you borrowed, plus the interest rates charged ‘on’ it. Three factors come into the equation—how much you borrowed, the rate of interest, and the loan tenure. There are ways to bring your EMI down: for one, it drops automatically if there is a decrease in interest rates, or if you pay back more than you need to (called a ‘partial prepayment’).

What is an amortization schedule?An amortization schedule is a table giving the reduction of your loan amount by monthly instalments. The amortization schedule gives the break-up of every EMI towards repayment of interest and the outstanding principal of your loan.

What is negative amortization?When interest rates go up, the interest component of an EMI also goes up. The EMI is kept constant but will result in a lower principal component. If the rates move up continuously, then there might be a situation where the interest Component becomes more than the EMI. In such a situation, principal component (EMI minus interest component) gives a negative figure. Consequently, the outstanding balance, instead of being reduced from the opening principal with the principal component, gets increased with the negative principal component. This is commonly referred to as negative amortization.

A loan where the amortization is negative does not get repaid, since the regular payments are insufficient to cover the interest component. The unpaid interest gets added to the principal and makes it grow. The situation gets reversed only when interest rates start falling. In this situation, the customer has to part-prepay the loan amount, increase the EMI of the loan, or do both.

How does any rate change impact the loan amortization schedule?In case of a loan with a floating interest, the interest component is subject to change. When the rates change, one of the following two changes can be done to a loan:

• The term of the Loan is extended (when rates go up) or contracted (when rates go down)
• The EMI amount is reset (increased in case rates go up & reduced in case rates come down)

As a practice, the term of the loan is extended since the customer might have given post-date cheques and it would be difficult to replace them on every rate change. However, in case of under construction properties, the Pre-EMI amount is increased by default.

You can choose any of the above options according to your convenience. The default option is to change the EMI to match the balance tenure of a loan.

What is proactive downward repricing?The pricing increase happens only in the scenario of an increase in the Cost of Funds. Pro-active repricing policy is being put in place as a proactive measure to ensure that there is no inordinate increase in your loan pricing against new acquisitions and there is always parity for your loan.

What are the types of properties for which I can avail a Loan Against Property?

  • You can avail a Loan Against Property for the following:• Self-Occupied Residential
    • Rented Residential / Commercial
    • Vacant Residential / Commercial
    • Shared PropertyYou can not avail a Loan Against Property for the following:• Plot
    • Property outside city/municipality limit
    • Property with tenants for more than 5 years (with no renewed rent agreement)
    • Property with structural flaws that requires substantial repairs
    • Property constructed on agricultural land/farm land
    • Illegal properties
    • Property already mortgaged with other banks
    • Residential property used for commercial purposes without approval from competent authority
    • Under construction property except NRP transaction
    • Industrial property
    • Schools or hostels
    • Hotel
Processing Fee: 1% – 2% of the Loan amount is collected from the customer depending on property type