Loan Against Property - Alltopicblog

One of the better ways to obtain large amount of funds at short notice and at low interest rates is to go in for loan against property rather than unsecured personal loans or loans against securities. Lending institutions have their own criteria and applicants will be required to follow the process that is more or less the same across banks. You can avail of loan against property to meet some urgent requirements or to extent or renovate existing property.

Eligibility criteria for Loan against property

Salaried individuals are considered only if they are government employees, bank staff or working in a large company since many years. Applicants must be minimum 24 years of age as on the date of applying for the loan.

Self employed individuals who are paying income tax and filing ITRs are eligible and they too must be not less than 24 years of age or over 70 years of age(on the date of maturity of loan)

Professionals such as chartered accountants, architects, lawyers and doctors must be paying income tax and must furnish proof of their registrations and certifications. Age criteria is the same as for self-employed individuals.

Documents required for Loan against property

Salaried Applicants

Proof of identity: voter ID, driving licence, PAN Card, Photocredit card, government employee ID card with name and address, UID card (any two)

Proof of income: Salary slip of past 3 months showing deductions or form 16 along with salary certificate

Proof of residence: Bank account statement for past 3 months; latest electricity or landline bills; latest LIC Policy or premium receipt; employee letter confirming residence address; NSC or similar instruments.

Bank statement: Bank statement for past six months showing salary credited to the account

Guarantor form: This is optional but in most cases banks will ask for at least two guarantors who are in permanent employment.

Lease agreement: Copy of lease agreement is required for lease rental discounting.

Property documents: All applicants have to submit clear documents relating to the title along with approved building plan. A fresh valuation report of the property by a professional valuer appointed by the bank will also be required.

Declaration that the loan amount will not be used for any illegal purposes or for speculation.

Documents for Self-employed/Professionals

Proof of identity: voter ID, driving licence, PAN Card, Photocredit card, government employee ID card with name and address, UID card (any two)

Proof of Income: IT returns for last 2 years and computation of income with CA certification

Proof of residence: Proof of residence: Bank account statement for past 3 months; latest electricity or landline bills; latest LIC Policy or premium receipt; employee letter confirming residence address; NSC or similar instruments.

Bank Statement: Last 6 months passbook or bank statement of the account where income is deposited.

Guarantor: This is optional but banks may insist you furnish two guarantors

Lease agreement: copy of lease agreement in respect of lease rental discounting cases.

Self employed professionals also have to furnish last 3 years audited profit and loss account and balance sheet.

Declaration that the loan amount will not be used for any illegal purposes or for speculation.

Loan Amount and Tenure

Loan against property depends on the value of the property and can go up to Rs. 10 crores. Tenure of the loan can stretch from 5 to 15 years. However, keep in mind that loan is sanctioned only for 65% of the market value of the self owned property; 55% of leased out property and 50% in case of commercial or industrial property. Loan amount is also calculated depending on income, age and repayment capacity of applicant.

Security of Loan against property:

Banks will usually have first charge on the property against which loan is disbursed. They may ask for additional pledge/hypothecation and assignment as they deem fit.

Charges of Loan against property:

Norms vary from one bank to the other but in general you can expect to pay administrative and processing fee amounting to 0.5% to 1.5% of the loan value.
Interest rates may vary from 12% to 16%.
Prepayment is possible and terms vary from one bank to the other. Most banks may not charge any penalty for prepayment but if and when they do the charge is between 2 to 4% in case of fixed rate loan. Floating rate loans are exempt from such prepayment charges.
Some banks may compulsorily ask you to go in for an insurance policy for the loan amount and this adds to the charges.

Co-applicants for Loan against property

Applicants can have co-applicants in the loan application form. The co-applicant may be earning an income or may not but can join. If the co-applicant is also joint owner of the property to be mortgaged, then it is favorable. In any case, co-owners of property must be joined as co-applicants.

If you are running a partnership business then the key partner is also required to join as a co-owner.

In the matter of companies, 76% shareholders become co-applicants.
In both above cases if loan is against property owned by the firm or company then all partners and directors become co-applicants.

Loan against property for NRIs

A non-resident Indian (NRI) is an Indian citizen and passport holder currently employed outside of India and residing outside India on temporary basis. A PIO is a citizen of another country but can be a person who previously held an Indian passport or had parents or grandparents as Indian citizens.
Salaried NRIs can apply for loan against property

Loan amount: NRIs can expect to receive 55% of the property value as loan amount in case it is self owned residential property and 45% for commercial property, subject to other eligibility criteria.

Duration or Tenure: Tenure can range from 3 years to 15 years

Income eligibility: NRIs must be earning at least USD 80000 per annum but varies from one bank to another.

NRIs must have a co-applicant resident in India, who is assigned a power of attorney to execute various documents and must reside in the city where the loan is applied for.

Property documents: All property documents and latest valuation certificate need to be furnished along with application. NRI must also submit proof of employment, proof of income, certified tax returns in the country where he is resident, address proof and the same documents that are required in other categories.

NRIs must submit copy of valid passport, visa stamp page copy, copy of valid visa or work permit, overseas bank account statement showing salary credits for last 3 months, 3 months’ NRE/NRO account statement, local credit bureau report of the country where he is resident.
Pre-payment of loan: This varies from one institution to another. Some levy penalty between 2 to 4% while floating rate of interest loans are exempt.

Process for NRI Loan against property

• You compare terms of offers available from various institutions and then contact agent.
• No charges apply when you request our assistance.
• Our agents coordinate your application, help you fill out papers and check that documents are in order.
• They then forward your loan request to the selected institution and you are assigned a unique code. The bank’s representative gets in touch with you for further discussion.
• Bank representative visits you for application process and to collect documents.
• NRIs need to sign NRI application form and send by Fax or courier to the bank along with documents notarized by a local notary.
• Bank logs in the application and a representative visits premises for verification. For NRIs the bank may conduct verification at place of residence or work or against documents.
• Bank’s legal cell checks property documents and submits report.
• Bank’s valuer checks property and issues market value report.
• If everything is in order you are called for a personal interview at the bank.
• If interview is OK then bank issues official letter approving the loan
• If you agree then bank issues sanction letter and you may necessary fees and sign papers and submit documents as may be required.
• Bank verifies documents and deposits loan amount in your account if verification is OK.