Eligibility Criteria for Loan against Property in India

Loan Against property or LAP as it is commonly known in trade parlance is the most popular form of funding amongst businessmen and companies/firms in India. In this, company or businessmen mortgaged its property and in return gets loans from banks and financial institutions.

One of the important features of Loan against property or LAP is that the end use of such loans is not restricted. Therefore, unlike home loan, where the borrower has no option but to purchase house only from such loan, in LAP, there is no such restriction. Moreover, in loan against property, money is credited in bank account of borrower unlike in home loan, where money is paid directly to seller of property by banker.

Loan against Property LAP

Although different banks have different eligibility criteria for granting loan against property or LAP, however, some of the most common requirement are as mentioned under:

  • The borrower of LAP should be major
  • He/She should be Indian resident and owning properties in metro cities or tier 2 and tier 3 cities
  • They should be salaried employee with either a private limited company or public sector undertaking of Multinational companies.
  • Some banks also have criteria for age limits before granting loans
  • Property should be free from any encumberance
  • Entire chain of property should be available with the borrower i.e documents of original allottee, then documents of each subsequent sale of such properties.
  • Some banks have criteria of negative area and in case of property located in negative area, they do not normally grant loan against property or home loan
  • Another requirement of some of the banks are that proper MAP of the property shall be available as well as house tax etc of such property should be paid. However, some NBFCs and banks are lenient with this type of requirement.
  • For businessmen or professionals seeking LAP or home loan, normally their business continuance proof for last 3 years is required.

Documents required for Loan against Property in India

In case of salaried employees, following documents are normally required:

  1. Copy of latest salary slips
  2. Copy of bank statements for last 3 to 6 months
  3. KYC documents like copy of PAN, Aadhar card
  4. Copy of address proof
  5. Passport size photograph
  6. All the documents relating to property – entire chain of property would be required
  7. Copy of last 3 years Income Tax Return
  8. Copy of form 16 received from employer

In case of self-employed, following documents will be required

  1. Copy of GST registration, IEC registration or any other documents showing continuance of business
  2. Copy of bank statements for last 6 to 12 months
  3. KYC documents like copy of PAN, Aadhar card
  4. Copy of address proof
  5. Passport size photograph
  6. All the documents relating to property – entire chain of property would be required
  7. Copy of MAP of the property and house tax challan paid
  8. Copy of last 3 years Income Tax Return
  9. Copy of Audited or otherwise balance sheet and profit and loss account for last 2 to 3 years

 

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Author: Anil Agrawal
EZYBIZ India Consulting LLP, New Delhi. The firm is business and tax consultancy firm providing consultancy in Taxation, Regulatory, Transfer pricing, Valuation, Corporate funding and Business set up matters. He may be reached at 9899217778 or anil@ezybizindia.in.
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