Features of a Property Loan
Secured Loan: The loan is backed by the property, reducing the lender's risk and typically resulting in lower interest rates than unsecured loans.
High Loan Amount: Borrowers can access a substantial amount, often ranging from 50% to 75% (or more, depending on the lender) of the property’s market value.
Flexible Usage: Funds can be used for various purposes, such as business expansion, education, medical expenses, debt consolidation, or personal needs (though some lenders may restrict usage, e.g., speculative investments).
Competitive Interest Rates: Since the loan is secured, interest rates are generally lower than those of personal loans, typically ranging from 8% to 15%, depending on the lender and borrower’s profile.
Long Repayment Tenure: Tenure can extend up to 15–20 years, allowing for manageable monthly installments (EMIs).
Overdraft Facility: Some lenders offer an overdraft option, where borrowers can withdraw funds as needed up to a sanctioned limit, paying interest only on the utilized amount.
Prepayment Flexibility: Many institutions allow prepayment or foreclosure with minimal or no penalties, though this varies by lender.
Top-Up Option: Borrowers with an existing LAP may apply for additional funds if the property value supports it.
Eligibility Criteria for a Property Loan
Eligibility criteria vary across lenders, but the following are common requirements:
Age:
Minimum: Typically 21–25 years at the time of application.
Maximum: Usually 65–70 years (or retirement age) at the time of loan maturity. Some lenders extend this to 85 for self-employed individuals with strong profiles.
Nationality and Residency: Must be a resident Indian. Non-Resident Indians (NRIs) may be eligible with additional conditions.
Employment Type:
Salaried Individuals: Employed with a government organization, PSU, MNC, or reputed private company with a stable job history (often a minimum of 2–3 years).
Self-Employed Individuals: Business owners, professionals (e.g., doctors, engineers, CAs), or traders with a regular income source and typically 3+ years of business stability.
Income:
Minimum annual income requirements vary (e.g., ₹2,40,000–₹3,00,000), depending on the lender.
Stable and verifiable income is essential to ensure repayment capacity.
Credit Score: A score of 700 or above is preferred, though some lenders accept lower scores (e.g., 650) with stricter terms.
Property Ownership: The applicant must own the property (residential, commercial, or land) with a clear title, free from legal disputes or encumbrances.
Property Value: The loan amount depends on the property’s market value, assessed by the lender, with a typical Loan-to-Value (LTV) ratio of 50%–75%.
Debt-to-Income Ratio: Lenders evaluate existing debts to ensure the borrower can handle additional EMIs.
Additional factors like job stability, business vintage, and co-applicant income (if applicable) may also influence eligibility.
Documents Required for a Property Loan
The documentation process ensures the lender can verify the borrower’s identity, income, and property details. Requirements differ slightly based on employment type, but here’s a general list:
For All Applicants:
Application Form: Duly filled and signed, often with passport-sized photographs.
Identity Proof: PAN card (mandatory), Aadhaar card, passport, voter ID, or driving license.
Address Proof: Aadhaar card, utility bills (electricity, water, gas), passport, or rent agreement.
Property Documents:
Title deed or sale deed.
Property registration certificate.
Approved building plan (if applicable).
Property tax receipts.
No Objection Certificate (NOC) from the housing society or builder.
Encumbrance certificate (showing the property is free of legal liabilities).
Possession certificate (if applicable).
For Salaried Individuals:
Income Proof:
Salary slips for the last 3–6 months.
Form 16 for the past 2 years.
Bank statements (salary account) for the last 6–12 months.
Employment Proof:
Appointment letter or employment certificate.
Experience certificate (if applicable).
For Self-Employed Individuals:
Income Proof:
Income Tax Returns (ITR) for the last 2–3 years.
Profit & Loss statement and Balance Sheet (certified by a CA, if applicable).
Bank statements (business/personal) for the last 6–12 months.
Business Proof:
Business registration certificate (e.g., GST certificate, Udyam certificate).
Partnership deed (for partnership firms) or Memorandum of Association (for companies).
Professional degree/certificate (e.g., for doctors, CAs).
Additional Documents (Case-Specific):
Processing Fee Cheque: Required by some lenders to initiate the process.
Existing Loan Details: Sanction letter and repayment records if the applicant has other loans.
Insurance: Property insurance may be mandatory; mortgage loan insurance is optional but recommended.
Rate of Interest: 5% Tenure 1 to 20 years