Property Accepted for LAP: Loan Against Residential & Commercial Property

What is a Loan Against Property (LAP)?

A Loan Against Property (LAP), commonly referred to as a mortgage loan, is a multi-purpose secured loan where you pledge your existing real estate as collateral to unlock its market value in accordance with the RBI Fair Practices Code. Unlike a home loan and personal loan which is restricted to the purchase or construction of a new house, LAP offers total end-user flexibility allowing you to fund business expansion, higher education, medical emergencies, or wedding expenses without usage restrictions, provided the purpose is legal.

As a regulated NBFC, Hero FinCorp allows you to leverage the equity of your property while maintaining its possession and usage rights during the loan tenure.

What Type of Property Can Be Used for a Loan Against Property?

Lenders typically accept a wide range of real estate assets, provided they have a clear, marketable, and encumbrance-free title. The property accepted for Loan Against Property generally falls into these categories:

1. Residential Properties

These are spaces constructed for human habitation. Lenders generally offer the highest Loan-to-Value (LTV) for this category due to high marketability.

• Self-occupied Houses: Independent bungalows or villas where the owner resides.
• Flats & Apartments: Individual units within multi-story buildings or townships with a valid Completion Certificate (CC).
• Rented Residential Property: Properties that are currently leased out to tenants, where rental discounting (LRD) may also be applicable.

2. Commercial Properties

Real estate utilized for business-related activities. As per market trends, commercial units in prime business districts are highly valued.

• Office Spaces: Dedicated units for corporate or professional operations.
• Shops & Retail Outlets: Functioning bases for retail entities located in approved commercial zones.
• Warehouses & Godowns: Spaces used for storing goods, subject to structural stability audits.

3. Mixed-Use Properties

A common occurrence in megacities, these single properties are used for both residential and commercial purposes (e.g., a shop on the ground floor with a residence above). Lenders evaluate these based on the predominant usage area.

4. Industrial Properties

Spaces dedicated to manufacturing and transport facilities, such as factories or depots. These may require additional environmental clearances for eligibility.

5. Vacant Plots of Land

Unused, undeveloped plots can also be used as collateral. Note that these may attract higher interest rates and a lower LTV (typically capped at 50-60%) as they are often valued less than developed properties.

Key Factors Influencing Property Eligibility

Merely owning a property does not guarantee a loan. Regulated lenders evaluate several critical parameters:

• Clear & Marketable Title: The property must be free from legal disputes, and ownership must be clearly established through registered deeds verified by a legal empaneled advocate.
• Approved Plans: Constructed properties must have sanctioned building plans from local municipal authorities (e.g., DDA, BMC, DTCP).
• Property Location: Properties in high-demand urban areas fetch better Loan-to-Value (LTV) ratios compared to those in emerging or rural regions.
• Usage Compliance: The property must be used in accordance with local zoning norms.
• Age and Condition: Lenders typically prefer properties where the remaining economic life exceeds the loan tenure by at least 5-10 years.

Loan Against Property Eligibility Criteria

Under the 2025 Scale-Based Regulation (SBR) framework, Hero FinCorp ensures a hassle-free experience for self-employed individuals:

• Age: 25 to 75 years at the end of the loan term.
• Citizenship: Indian nationals only.
• Occupation: Currently, our mortgage loans are tailored for entrepreneurs and self-employed professionals.
• Business Stability: The business must have been active and profitable for at least three consecutive years (verified through audited financial statements).
• Credit Score: A CIBIL score of 700 to 750 or above is preferred to secure competitive interest rates.

Documents Required for Loan Against Property

To ensure fast processing (typically 7-10 days), have the following documents ready:

• Identity & Address Proof: Aadhaar Card, PAN Card, Passport, or Voter ID.
• Business Proof: GST certificate, Udyam certificate, or Trade License.
• Income Proof: Last 3 years’ ITRs, Income Statement, Profit & Loss Statement, and Balance Sheet attested by a Chartered Accountant.
• Bank Statements: Previous 6 months of active bank account records.
• Property Documents: Title deeds, sale deeds, possession letters, and latest property tax receipts.

Difference Between Loan Against Property and Home Loan

While both are secured by real estate, they serve different purposes and follow different regulatory ceilings:

Understanding Loan-to-Value (LTV) Ratio in LAP

The LTV ratio determines the maximum loan amount you can borrow based on your property's Fair Market Value (FMV), not the registration value.

• The Formula: LTV = (Loan Amount / Property Value) x 100.
• Example: If your property is valued at ₹1 Crore and the lender offers a 60% LTV, you are eligible for a loan of ₹60 Lakh.
• Impact: As per RBI Master Directions (2025), LTV caps are strictly enforced to prevent over-leveraging.

Frequently Asked Questions (FAQs)

Is Taking A Loan Against Property A Good Idea?

Yes, if you need a large sum of money at an interest rate lower than a personal loan. It allows you to leverage your asset's value while continuing to use it. Always ensure your monthly income comfortably covers the EMI.

What Is The EMI Against A Loan Against Property Of Rs 20 Lakh?

At an indicative rate of 11% for 15 years, the EMI would be approximately ₹22,732. However, rates are subject to the lender’s risk assessment and the borrower's credit profile.

Does The Property Have To Be Insured?

Yes, as per the Fair Practices Code, lenders require the property to be insured against fire and other natural calamities to protect the interest of both the borrower and the lender.

What Is The Floating Rate Of Interest In LAP?

A floating rate changes according to market conditions (linked to a benchmark like the Repo Rate).

Note: Effective January 1, 2026, new RBI norms prohibit prepayment charges on floating-rate loans granted to individuals for non-business purposes.

Can I Get A Loan Against A Property That Is Already Mortgaged?

Typically, no. However, you can opt for a "Loan Balance Transfer" where a new lender pays off your existing debt and may provide a "Top-up Loan" based on current property appreciation.

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