Hello everyone, Welcome to this post where we do not lock but rather unlock the knowledge of finance in today’s blog post. Here I am going to give you detail on commercial property loan interest rates.
What is a Commercial Property Loan?
We are going to talk about commercial property loans Whenever you buy a property, a loan is a big and nice way to finance your property. Now, you easily get a home loan for residential property but when you buy commercial property like any office space and retail space like a shop or showroom for that, you’ve to take a loan for commercial property and that Loan is not easy to get as easily as you get a home loan. I’ve written a very detailed post on a home loan What are the process and documents?
In this post, We will know about all the things related to commercial property loan interest rates in detail. Alongside this, we will also know about other topics like
- What are its important features?
- For which type of property do you easily get a loan? And for which type of properties you do not get a loan?
- how much is the commercial property loan interest rate?
- For what time period do you get the commercial property loan?
- What are the advantages and disadvantages of commercial property loans?
- What are the eligibility requirements to get a commercial property loan?
- What is the documentation for the commercial property loan?
Also, I’ll give you some tips related to the commercial property loan in the end.
Commercial Property Loan’s Important Features & Eligibility Requirements
So stay tuned to this post till the end Let’s go straight to the post. So let’s talk about commercial property loan’s important features. First Let’s talk about the purpose first For what reason or for what kind of properties do you get a commercial property loan?
So If you want to buy an office space or any retail space like a shop or a showroom For that, you get a commercial property loan Along with that, if you want to buy a ready-to-move property or an under-construction property under-construction means if you book a property with a builder which is not ready yet which is under construction for that too, you get a commercial property loan. After that, if you want to do an extension, construction or renovation of your shop or office so you get a property loan for that as well.
Also, if you want to buy a plot and along with that, want to do construction on it so you get a combined loan too. For a commercial plot, it’s difficult to get a loan. But for a plot plus construction, a loan is sanctioned easily.
Your Ownership Rights with Loaned Commercial Property?
Now let’s talk about what kind of loan is a commercial property loan. It is basically a secured loan which means if by chance you defaulted on a loan then the bank can take over the property and can auction it to recover loan dues. This is what a secured loan means.
Now let’s talk about ownership, So whenever you’ll take a commercial property loan, ownership will be with you. The bank will not take over that property.
So you can use the property as you want, and you can also rent it out and suppose by chance you are not able to pay off the rent because of any reason. You can sell that property as well. And pay off your loan.
So this is always a better option if by chance you are not able to repay the loan then if you sell the property yourself, you’ll get a better deal and also you won’t bear much loss because when the bank auctions the property, it sells the property at a very low price and you could bear a loss in that case.
Commercial Loan for Jointly Owned Properties
Although it is only for emergencies, you won’t need this in general. It’s just my duty to inform you about all this. Now let’s talk about joint ownership Suppose you buy this property with someone else suppose you buy it with your father, wife or with any other relative. So if you take a loan, every member has to become a co-applicant in that loan.
And maximum tenure of the loan against the commercial property is 15 years generally. Up to 10 years, Commercial Property Loan gets approved very easily. But some banks also give the loan for 15 years.
Commercial Property Loan Interest Rate
Let’s talk about the interest rates of commercial property loans. Interest rates of commercial property loans are always higher than home loans.
About 1.5-2% higher. Suppose you are getting a home loan at 8% on today’s date, so you’ll get a commercial property loan at about 9.5-10%. Also, the bank can ask you to ensure the property if a fire hazard happens or any natural calamity struck like an earthquake etc. So you may need to take insurance against your commercial property as well.
The bank insists on insurance for loan repayment. So may need to take commercial property insurance, so be ready for this also.
Comparison of Commercial Property Loan Interest Rates Across Various Banks:
Here I am providing SBI, Bank of Baroda, Axis Bank, ICICI Bank, HDFC Bank, IDBI Bank, IDFC Bank, Bajaj Finance Bank, LIC Housing Finance, Canara Bank, and Kotak Mahindra Bank commercial property loan interest rates list so that you can get difference among their interest rates. End of the post, I have provided their official commercial property loan page links. So that you can go on their website and check more about their interest rates.
| Bank Name | Commercial Proprty Loan Interest Rate |
| SBI | 7.50% – 9.75% |
| Bank of Baroda | 8.25% – 9.25% |
| Axis Bank | 10.50% onwards |
| ICICI Bank | 10.50% onwards |
| HDFC Bank | 9.50% onwards |
| IDBI Bank | 10.85% |
| IDFC First Bank | 10.50% onwards |
| Bajaj Finserv | 10.15% onwards |
| LIC Housing Finance | 8.90% – 9.90% |
| Canara Bank | 8.90% – 9.90% |
| Kotak Mahindra Bank | 8.00% – 9.00% |
How the Commercial Property Loan is Disbursed?
Let’s talk about disbursement. In the case of ready-to-move property, the bank pays a lumpsum amount directly to the seller on the day, the property is transferred in your name. On the same day, the bank directly gives a cheque or a DD in the name of the seller to the seller.
After that, if you buy an under-construction property and do a booking with a builder then a stage-wise payment is done. And as the construction progresses, the builder gets a stage-wise cheque. So these all were the important features of the commercial property loan.
Commercial Property Loan Eligibility: How Much Loan Can You Get?
Now let’s talk about the eligibility how much loan can you get? What kind of people easily gets a loan? What profile does the bank see?
So firstly, your repayment capacity can be seen that what is your annual income.
How many other loans are due on you? So suppose your monthly income is Rs.60,000. Bank says the maximum EMI every month we are talking about the maximum EMI, there can be up to Rs.30,000 per month. Rs.30,000 is considered your total EMI. Suppose an EMI of Rs.15,000 is already there current if we suppose.
So you have a balance of 15,000. Alright? Now you’ve left with a limit of 15,000. So your loan eligibility is calculated according to this 15,000. So this is all about the repayment capacity After that, the bank does the technical and legal due diligence on the property.
How is Commercial Property Value Evaluated?
A whole evaluation is made, what is the actual value of the property? Generally, banks assign a third-party professional property valuer and it evaluates a value how much should be the market value of the property? After that, the bank ensures the title of the property is clear and there are no encumbrances of any kind on that.
There shouldn’t be any charge of the third party. There shouldn’t be any kind of loan, liability or no tax dues. so the bank does check all these things. After that, if you are booking your property in an under-construction property then the profile of the builder is checked.
What kind of reputation has it had in the past? What is the track record of the delivery? So if the builder is low grade, then your loan may not approve easily. Then the technical specifications are seen what kind of property is it? Is it complying with building by-laws or not? All these things are also seen by the bank.
After that, you get a maximum loan of 70% of the property value. This means, suppose the value of a property is Rs.1 crore then your loan amount will be 70% i.e. up to Rs.70 lakhs, and the loan will be sanctioned.
And you’ve to make the downpayment from your own sources so you’ve to pay Rs.30 lakhs from your pocket. Apart from this, the customer’s profile is also seen.
How Does Your Financial Profile Shape Your Commercial Property Loan Journey?
So whenever you apply for a loan, your whole profile will be seen as if you belong to a salaried class, the salaried class gets a loan quite easily. If you are self-employed or professional or you have your own business, the loan can be sanctioned in every case but your occupation and income stability are seen. So your income tax returns will be seen. Your bank account statements & salary slips will be required.
If your income is seen as stable, the loan will be approved easily but if your income has ups and downs, you may have some trouble.
Age Requirements:
After that, the minimum age in the case of salaried is generally 22 years. You do not get a loan easily under the age of 22 years.
And in the case of non-salaried, if you are professional or if you have a business then the minimum age is kept as 25 years. Along with that, the maximum age is kept is 65 years.
So the eligibility also depends on the age. If your age is less, more loans can be sanctioned because your loan tenure increases. You can get a loan for a maximum of 15 years. Now suppose your age is 55 years.
CIBIL Score:
If your retirement age is 60 years then you only have 5 years working then you may not get a tenure of more than 5 years. Then your credit score is seen credit score means a CIBIL score.
It is from 900 this score is decided as per your liability payments. This means if you defaulted on a credit card your score will drop. If you defaulted on loan repayment, your score will drop down.
So if generally, your CIBIL score is 750+ from 900 it is considered a nice score. If your score is less than 750, you should try to increase it All the defaults you’ve done and all the remaining loan repayments prepay them.
Assets & Liabilities:
Apart from these, assets and liabilities are seen that your liabilities should not be too much compared to the Assets which also becomes a very big deciding factor in loan eligibility. After that, your number of dependents is seen.
I’ve also talked about this, suppose your monthly income is 60,000 and let’s say you’ve 5 dependents on you. Then your monthly expenditure may be around 40,000 so these could be your expenses. If suppose you have got a monthly expenditure of 40,000 then the bank may sanction you a maximum EMI of 20,000, not 30,000.
Maximum EMI of 20,000. Now 20,000 is the maximum EMI and 15,000 is your current EMI Then your balance EMI is only left at 5000.
So in that case, your loan eligibility decreases a lot. So if your dependents are more so your loan eligibility depends on that as well.
Tip to Increase Commercial Property Loan Eligibility:
If your spouse i.e. if your husband or wife is working. So you also make them your co-owner or co-applicant. Your loan eligibility increases because their salary is also considered. So your loan eligibility depends on all these factors.
Additional Charges Other than Commercial Property Loan Interest Rates
Now let’s talk about some additional charges whenever you take a loan for a commercial property, there are some additional charges as well other than loan interest rates. What are these?
Processing Fees:
First, you should know about processing fees. Generally, processing fees are very loan in the case of a home loan. You can easily get at 0.25% in the case of a home loan.
But in the case of commercial property loans, generally, it is 1,1.5 or 2%. But you can negotiate it. Most of the banks negotiate up to 0.5% if your profile is nice. Many banks charge extra for legal and technical due diligence. Generally, it is a lump sum amount of 5000 to 10,000 rupees.
So ask beforehand, whether they separately charge for it or not. And if they do, you can negotiate in this as well you can say I only want to pay the processing fees. I do not want to pay the fees of legal and technical due diligence that the bank should bear.
Repayment and Foreclosure Charges
After that, prepayment and foreclosure charges are there. Pre-payment and foreclosure means suppose you do a part payment in between, Suppose you’ve taken a loan of 10 lakhs and you get Rs.2 lakhs in between from somewhere and you want to pre-pay it. So that is allowed and in some cases, there’s an extra charge and in some, there isn’t.
Foreclosure means when you want to end a loan before a tenure. Suppose the loan is for 10 years. But after 3 years you get a payment or money from somewhere. So you can complete the whole loan as well.
Commercial Property Loan Interest Rate Types
Floating Interest Rate:
So what kind of charges are there for it? If suppose you have a floating interest rate. So in that case, the charges are nill. Generally, the bank doesn’t charge but you should still ask the bank once. Is there any prepayment or foreclosure charge or not?
Fixed Interest:
In the case of fixed interest, generally, all the banks charge foreclosure and prepayment charges and this is generally 2-3% of the outstanding loan amount. Now along with financial services, GST is also applicable which is 18%. So these all are the additional charges other than interest rates.
Documentation to Get Commercial Property Loan
For Salaried & Self-Employed Person:
Now let’s see the documentation. If you are a salaried class, you’ve to give an application with a photograph Then the proof of your identity and residence will be added like a Pan Card, Aadhar Card, Voter Id or Passport etc.
After that, you’ve to give a bank statement for 6 months and salary slips for three months from which your income is known. Bank takes a cheque for a processing fee and you also have to give the returns of income tax form 16 or income tax years returns.
Generally, in the case of salaried, the bank asks for income tax returns of one year and in the case of self-employed and self-employed non-professional income tax returns of three years are asked generally.
Along with that, the titled documents of your property and approved plans are attached. The bank also does the due diligence of the property as we’ve also talked about it.
So you have to give a copy of all the property documents to the bank. It is required in all cases. Now salary slip, if you are a professional, a CA, a doctor, or an architect then, in that case, a salary slip is not required your income is known from your income tax returns only.
And an idea of your monthly income is made from your bank statements also. It is not applicable in the case of non-professionals salary slips are not required.
Additional Document Requirements for Professionals & Businessman:
Now the question arises, what all other documents are needed? in the case of professionals and businesses, we’ve already talked about income tax returns that you’ve to give income tax returns of three years.
You also have to give a certified audited balance sheet and profit and loss account from a CA of three years in the case of professional and business. And you’ve to give a certificate of educational qualification in the case of professional. And if you have a business, you’ve to give proof of business existence that your business is running for three years.
So you’ve to give proof of it and also have to submit a business profile. if you have any business. so these all documents are needed if you want to apply for a loan for commercial property.
Tips to Get Lower Commercial Property Loan Interest Rates
Let me give you some tips.
Compare the Interest Rates First
Whenever you go for a commercial property loan then compare the interest rates first. In today’s date, there are so many websites, you can check and compare interest rates online. And you should go with the bank that gives the lowest commercial property loan interest rate.
Make Your Spouse Your Co-Applicant
If you want to increase your loan eligibility, you can make your husband or wife a co-applicant if they are working their salary adds up with your salary. So your loan eligibility also increases very much. And if you want to buy a big property, you could buy it with your increased loan eligibility.
Get the Best Commercial Property Loan Deals from Official Bank Websites
SBI Bank:
- SBI’s commercial real estate loan is targeted at individuals who already own at least two houses and are looking to purchase another one.
- You can own up to 3 flats/houses/residential plots under the SBI CRE Home Loan.
- The interest rate for SBI’s commercial property loan ranges from 7.50% to 9.75%.
- The maximum loan amount offered by SBI for commercial property loans is Rs. 50 crores.
- The maximum tenure for a commercial property loan from SBI is 15 years.
- Official Page: SBI commercial property loan rate of interest
BOB Bank:
- The loan is secured against the property and can be used for various purposes such as business expansion, working capital requirements, etc.
- The interest rate for Bank of Baroda’s mortgage loan ranges from 8.25% – 9.25%.
- The maximum loan amount that can be availed is up to Rs. 10 crores.
- Official Page: BOB commercial property loan rate of interest
AXIS Bank:
- Attractive interest rates start from 11%.
- Avail LAP on your commercial or residential property or purchase a new one.
- Transfer your existing loan to Axis Bank and get a top-up loan at lower interest rates.
- Loan against property – Commercial.
- Take-over of existing loan with additional refinance (Balance Transfer).
- Doorstep service.
- Official Page: Axis Bank commercial property loan rate of interest
ICICI Bank:
- Attractive interest rates start from 9%.
- Avail LAP on your commercial or residential property or purchase a new one.
- Transfer your existing loan to ICICI Bank and get a top-up loan at lower interest rates.
- Loan against property – Commercial.
- Take-over of existing loan with additional refinance (Balance Transfer).
- Doorstep service.
- Official Page: ICICI Bank commercial property loan rate of interest
Kotak Mahindra Bank:
- Loans available from Rs. 3 Lakhs up to Rs. 75 Lakhs.
- Flexible tenure of up to 48 months makes repayment easier.
- Affordable interest rates starting from as low as 16% p.a.
- Low processing fee of up to 2% of the sanctioned loan amount plus applicable GST & other levies.
- Official Page: Kotak Mahindra Bank commercial property loan rate of interest
Canara Bank:
- Loans available up to Rs. 10 Crores.
- Low rate of interest.
- No prepayment charges.
- Longer tenure period of up to 7 years.
- Multi-purpose loan.
- Official Page: Canara Bank commercial property loan rate of interest
HDFC Bank:
- Loans available up to Rs. 50 Crores.
- Attractive interest rates.
- Longer tenure period of up to 15 years.
- Multi-purpose loan.
- Official Page: HDFC Bank commercial property loan rate of interest
IDBI Bank:
- Loan Purpose: The commercial property loan at IDBI can be availed for the purpose of buying resale, already constructed or commercial property under construction.
- Loan Amount: Up to Rs 5 Cr, Loan above Rs.5cr can be provided depending upon individual cases.
- Maximum Funding: Up to 55% of the market value or 65% of the registered value inclusive of stamp duty & registration charges (whichever is lower).
- Eligibility: The applicant should be an Indian resident or a Non-Resident Indian (NRI) with a regular source of income.
- Official Page: IDBI Bank commercial property loan rate of interest
IDFC Bank:
- Loan Purpose: The commercial property loan at IDFC can be availed for the purpose of buying resale, already constructed or commercial property under construction.
- Loan Amount: Up to Rs 10 Cr.
- Maximum Funding: Up to 80% of the market value of the property.
- Eligibility: The applicant should be an Indian resident or a Non-Resident Indian (NRI) with a regular source of income.
- Official Page: IDFC Bank commercial property loan rate of interest
Bajaj Finance:
- Loan Amount: Up to Rs. 10.5 Crore or even higher basis of your eligibility.
- Repayment Tenor: Flexible repayment tenors of up to 15 years.
- Interest Rates: Affordable mortgage rates of interest.
- Eligibility: The applicant should be an Indian resident or a Non-Resident Indian (NRI) with a regular source of income.
- Official Page: Bajaj Finance commercial property loan rate of interest
LIC:
- Loan Amount: Up to Rs. 7.5 Crore or even higher basis your eligibility.
- Repayment Tenor: Flexible repayment tenors of up to 15 years.
- Interest Rates: Affordable mortgage rates of interest starting from 9.50% p.a. onwards.
- Eligibility: The applicant should be an Indian resident or a Non-Resident Indian (NRI) with a regular source of income.
- Official Page: LIC commercial property loan rate of interest
Final Thoughts:
So I’ve covered all the major points related to the commercial property loan. Whenever you want a buy your commercial property or want to take a loan for it so I hope this information will be very helpful for you. If you liked this post, share it. If you want to know how you can save tax then you should read this article: How Amazon Paid $0 in Federal Income Tax in 2018?