Compared to residential loans, commercial property loan are usually larger and more complicated. They are made to accommodate the particular requirements of companies and investors wishing to finance the acquisition or refinancing of commercial real estate. These loans are typically provided by banks, credit unions, and other financial organizations, and the commercial real estate being bought or refinanced as well as the borrower’s other assets may be used as security.
List of 10 Banks that Offer Commercial Property Loans in India on Commercial Property
Some of the banks that provide low-interest rates on commercial property loans along with other advantages are highlighted in the table below:
|Bank Name||Rates Of Interest||Processing Fees||Loan Term||Lowest EMI||Other Benefits|
|HDFC Bank||9.05% – 11.05%||0.75%||5 years||₹ 1269||Low-interest rates, flexible repayment options|
|Axis Bank||8.00% – 10.05%||Rs. 5000||5 Years||₹ 956||High loan amounts, quick processing|
|Kotak Mahindra Bank||8.90% – 9.85%||0.75%||5||₹ 1261||Easy application process, flexible repayment options|
|IDFC First Bank Limited||9.00% – 12.05%||1%||5||₹ 1012||Customizable repayment options, balance transfer facility|
|Standard Chartered Bank||8.75% – 11.05%||Rs. 11000||5||₹ 999||High loan amounts, flexible repayment options|
|Punjab National Bank||9.05% – 11.05%||0.75%||5||₹ 1269||Low-interest rates, quick processing|
|Yes Bank||9.05-11.05%||1%||5 years||₹ 1017||Low-interest rates, flexible repayment options|
|L&T Finance||11.00% – 15.00%||1%||5||₹ 1137||High loan amounts, customized repayment options|
|DCB Bank||9.75% – 10.50%||1%||5 years||₹ 1059||Flexible repayment options, easy online application process|
|Karnataka Bank||10.50% – 13.20%||1%||5 years||₹1349||High loan amounts, easy application process|
Types of Commercial Property Loans Financing Options
While there are numerous types of real estate loans you can pursue, 10 are widely considered to be the best choices for purchasing long-term real estate investments, short-term business ventures, and everything in between.
- SBA Loans: Instead, your company needs to fulfill specific criteria, like: Should you meet the requirements, you can apply for government-issued SBA 7(a) business loans, which can provide you up to $5 million in capital. They also provide loans up to $5 million, which you can use for any significant purchases that could help your company expand.
- Conduit Loans: Conduit loans, sometimes known as commercial mortgage-backed securities (CMBS) loans, are commercial mortgages that are bundled with other comparable commercial loans and offered to institutional investors on secondary stock markets. Since all of the loans in a CMBS pool are collateral for one another, there is less risk involved and more entrepreneurs and business owners can obtain these loans.
- Commercial Mortgages (From a Traditional Bank): Conventional banks offer typical lending instruments called commercial mortgage loans, which are precisely what they sound like—loans for business buildings rather than residential real estate. Traditional banks’ commercial mortgages are an excellent choice for real estate investors as well as small company owners.
- Bridge Loans: In addition to being interest-only loans, bridge loans can also help you maintain minimal spending while you look for longer-term funding or sell the asset. Bridge loans are asset-based loans, which means that the borrower’s credit score and personal income are not as important to the underwriters as the asset’s performance and quality.
- Commercial Refinancing / Commercial Cash-Out Loans: Once you already have an ongoing loan on commercial real estate, such as office buildings, you can apply for a secondary loan for commercial refinancing. If you can get a lower interest rate, a smaller monthly payment, or if your current loan is about to mature, refinancing your business loan can be a good idea.
Factors that Affect Commercial Property Loan Interest Rates in India
Loan-to-Value Ratio (LTV): The loan amount divided by the property’s assessed value is known as the loan to value ratio, or LTV. The risk assumed by the moneylender in making the loan is indicated by the LTV ratio. An increased risk is indicated by a larger LTV ratio, and this could lead to an increase in interest rates.
Credit Score: A debtor’s credit score has a significant role in influencing the interest rate on a commercial real estate loan. A low credit score, on the other hand, suggests that the debtor is a high-risk borrower, which may result in a higher interest rate.
Income: Another significant aspect influencing the interest rate on a commercial property loan is the borrower’s or debtor’s income. A steady income stream for the debtor makes the moneylender more inclined to lend money at a lower interest rate. However, the moneylender may impose a higher interest rate if the debtor’s income is erratic or unpredictable.
Type of Property: The kind of property being borrowed or bought also affects how much a commercial property loan will cost in terms of interest. Properties that are deemed riskier by some moneylenders, like those in flood zones or areas with environmental dangers, may be subject to higher interest rates.
Market Conditions: Inflation, central bank interest rates, and the overall demand for commercial property loans are some other market factors that may have an impact on the interest rates for these loans. Interest rates could be lower if the market is doing well.
How to Apply for A Commercial Property Loan In India?
Make sure you are eligible for a commercial property loan in India before applying, and get the paperwork ready.
The following qualifications and paperwork are needed for proprietorship businesses, self-employed people, and salaried individuals:
- The debtor needs to live in India.
- A debtor’s age must be between 21 and 50 years old.
- The debtor needs to be able to repay the loan and have a steady source of income.
- A strong credit score is expected of the debtor.
Documents Required for Salaried and Self-employed Individuals/ Proprietorship Firm
List of Documents Needed for Salaried Individuals
- Identity documents such a passport, PAN card, Aadhar card, or voter ID.
- Aadhaar cards, passports, driver’s licenses, and voter IDs are examples of address evidence.
- Evidence of income can take the form of income tax returns, Form 16, bank statements for the last six months, or salary slips for the previous six months.
- Evidence of employment, such as a letter from the company detailing the role, pay, and number of years worked.
List of Documents Needed for Self-Employed Individuals or Proprietorship Firms
- Proof of identity such as a passport, voter ID, Aadhaar card, or PAN.
- Address proof can be a voter ID, passport, driver’s license, or Aadhaar card.
- Evidence of income in the form of bank statements for the last six months, income tax returns, GST reports, or audited financial accounts for the previous three years.
- Evidence of company, including the certificate of business registration, business
In India, rates for loans for commercial real estate can differ greatly depending on a number of variables, including the lender, the loan amount, the location of the property, the loan term, and the borrower’s creditworthiness. In addition, borrowers should make sure they have a clear repayment plan and think about the long-term financial effects of taking out a commercial property loan. In the end, a commercial property loan can be a useful instrument for business growth and expansion in India if it is carefully thought out and planned for.