Types of Loan Against Property in India

There are various ways in which a Borrower can raise Equity against his property. It can be in the form of Term loan or Overdraft as follows:

Loan Against Property (LAP) – Term Loan:

This is the most basic and common type of Home Equity loan which has following features / benefits:

  • Fixed term loan wherein a fixed EMI is paid every month and the principal gets amortized over the loan period
  • EMI is paid on monthly reducing basis, which means pricipal gets reduced gradually every month
  • Taken to fund a one time Investment / Expenditure requirement

 

Maximum loan – Upto 70% of the market value of property depending on Bank policies and based on the repayment capacity of the borrower

Maximum Term – Upto 15 years depending on borrower profile and Bank policies

Property Type – Property can be residential or commercial or industrial or even vacant plot in some cases

Rate of Interest – Loan Against Property Rate of Interest

 

 

Property Overdraft (OD): You can have your Cake and eat it too !!

Yes that is the way to describe a Property OD limit, which has advantages of both LAP term loan and a Bank OD limit. It has following features / benefits over a normal term loan:

  • Rather than giving an upfront loan disbursement, an OD limit is set in the lender’s Bank A/c
  • Interest is charged only on the actual amount utilized as per daily outstandings similar to a Bank OD limit. Total interest is debited on the last day of the month
  • Normal current account cheque book is issued, through which borrower can withdraw / deposit funds on day to day basis
  • Dropline OD limit is set which can be monthly dropline or annual dropline

 

Maximum loan – Upto 60% of the market value of property and based on the repayment capacity of the borrower

Maximum Term – Upto 10 years depending on borrower profile and Bank policies

Property Type – Property can be residential or commercial or industrial

Rate of Interest – Property OD usually attracts 0.5% – 1% higher rate as compared to a Normal LAP. Loan Against Property Interest Rates

 

Lease Rental Discounting (LRD):

LRD or Loan against Rent Receivables (LARR), as the name suggests is a loan scheme in which a borrower can take loan against his rental income by mortgage the rented property. The borrower pledges the future rental earnings from the rented property to the bank for loan repayment. It has following features:

  • Loan available against rental income from commercial property
  • No other income proof required
  • Suited to persons having rental income having primary source of income
  • Also suited to builders / investors wanted to raise additional capital against existed rented property
  • Rental income is assigned in favor of the lender
  • Escrow Account is opened in the lender’s bank. Rental income is credited in it and EMIs are recovered through ECS

 

Maximum loan – Upto 50% of the market value of property and based on the net rental credits

Maximum Term – Upto 10 years depending on the balance lease period

Property Type – Property should be Commercial or industrial

Rate of Interest – LRD usually attracts same or lesser rate as compared to a Normal LAP. LAP Interest Rates