Commercial Property Loan

A commercial property loan is a credit facility to purchase a commercial space. Purchase of commercial property can be categorised into two main types - office space and retail outlet. These two categories can be further divided into two sections - ready to occupy and under construction. There are many financial institutions in India that fund commercial properties. The details are described below.


Commercial Property Loan Interest Rate

Following are the commercial property loan interest rates of top lenders in India:

Bank NameRate of Interest (p.a.)Processing Fee
HDFC Bank9.05% - 11.05%0.75% - 1 % + GST
IDFC First Bank9% - 12.05%Up to 1% + GST
Yes Bank9.05% - 11.05%Up to 1% + GST
Kotak Mahindra Bank8.9% - 9.85%0.75% - 1 % + GST
SMFG Fullerton India 10% - 12%Up to 1% + GST
ICICI Bank9% - 10%Rs. 5,000 - 1% + GST
IndusInd Bank9.5% - 10.5%Up to 2% + GST
TATA Capital 11% - 15%Up to 1% + GST
Bajaj Housing Finance8.05% - 12%Up to 1% + GST
L&T Finance11% - 15%Up to 1% + GST
Punjab National Bank9.05% - 11.05%0.75% - 1% + GST

You can also check Loan Against Property Interest Rates 

Features and Benefits of Loan on Commercial Property

The key features and benefits of commercial real estate loans are mentioned below:

  • Customised loan repayment options to suit your requirements.
  • Easy and minimal documentation.
  • Long tenure up to 15 years.
  • Higher loan amounts than personal loans or business loans because commercial properties are revenue-generating assets.
  • Commercial property loan rates are lower than personal loans since the former is considered a secured loan.
  • Apart from commercial property interest rates, the processing fee is also low for these loans.
  • You can opt for a shorter EMI as compared to unsecured loans.
  • Under Section 24, you can avail of tax deductions on the interest payments towards commercial property loan EMIs. 
  • Investing in a commercial property can increase your net worth as the property's value appreciates over time.
  • You can avail of a loan for construction of commercial building, loan to buy commercial property, commercial shop loan or a commercial property loan for other such purposes.
  • A commercial property can generate rental income for you, which can help you offset the EMI payments.
  • You can also avail of a loan against commercial property or a loan against property for business.

You can also check Loan against Agriculture land

Eligibility Criteria For Commercial Property Loan

Following are some common eligibility criteria for commercial property purchase loans:

  • The applicant should be an Indian resident to avail of a commercial property loan from commercial bank or any other lender. 
  • The age of the borrower must be 28 – 58 years (if salaried) and 25 – 70 years (if self-employed). 
  • The applicant should be employed in the public, private or MNC sector.
  • The applicant should have a regular source of income.
  • The income of the applicant must be at least Rs. 25,000 to Rs. 35,000 (varying from one city to another).
  • The applicant should have a work experience of at least 3 years (if salaried) and 5 years (if self-employed).

You can also check Loan Against Property Eligibility from Top Banks Online.

Documents Required for Commercial Property Purchase Loan

To avail of a commercial building loan, you must furnish the documents mentioned below along with completed loan application form (duly filled in affixed) with 3 passport-size photographs:

  • KYC documents: PAN Card or Form 60 
  • Identity and current address proof (any one): Valid Passport, Driving License, Voter ID Card, Job Card issued by NREGA, Letter issued by the National Population Register, proof of possession of Aadhaar Number.
  • Income documents: 
    • Salaried Applicant/ Co-applicant/ Guarantor: Salary Slip/ Salary Certificate of last 3 months, copy of last 2 years’ Form 16/ ITR, acknowledged by IT Dept.
    • Non-Salaried Applicant/ Co-applicant/ Guarantor: Business address proof, ITR of last 3 years, Balance Sheet and Profit & Loss Account of last 3 years, Business License Details (or equivalent), TDS Certificate (Form 16A, if applicable), and Certificate of Qualification (for CA, Doctor & other professionals).
  • Property documents:
    • Copy of the Allotment Letter/ Buyer Agreement
    • Title Deeds including previous chain of property documents
  • Other documents: 
    • A processing fee cheque in favour of the lending institution
    • Details of ongoing loans (if any) of the individual and business entity
    • Own contribution proof

You can also Check the necessary Documents required for Loan Against Property

EMI Calculation for Loan against Commercial Property

You can calculate the EMI for your loan against commercial property using free to use Commercial Property Loan EMI Calculator available online on various platforms. All you need to do is follow the simple steps given below:

  • Search for and open a Commercial Property Loan EMI Calculator on the internet.
  • Enter a few basic details such as the loan amount, tenure (in years), and interest rate (% p.a.).
  • Click on the ‘Calculate’ button to know the EMI.

The calculator will provide you with the following details:

  • Monthly commercial property loan EMI
  • Principal amount
  • Total interest amount
  • Total amount payable to the lender

Here’s an illustration:

If you want to borrow a business property loan amount of Rs. 50 Lakhs for 15 years of tenure at an interest rate of 8.50% p.a., the Commercial Property Loan EMI Calculator will display the following result:

Monthly Commercial Plot Loan EMI: Rs. 69,979

Principal Amount: Rs. 50,00,000

Interest Amount: Rs. 75,96,284

Total Amount Payable: Rs. 1,25,96,284

You can adjust the value entered on the Loan Against Property Calculator to suit your budget. 

Points to Consider Before Applying for a Commercial Property Loan

If you are planning to apply for a commercial land loan, you must keep the following factors in mind to aid your decision:

  • Eligibility and documentation requirement: Checking your eligibility for the loan is the first thing you must do. Each lender has its own eligibility parameters. Make sure you fulfil the criteria of the preferred lender and have all the required documents in place before applying for the loan. 
  • Interest rates and other charges:  Interest on commercial property loans and charges can differ from one lender to another. To get the lowest interest rate for commercial property loan, you must do a thorough research first. Knowing the interest rates, processing fees, prepayment penalties, and other charges is another essential factor to be considered. 
  • Loan-to-value ratio: The loan-to-value (LTV) ratio is the percentage of the property’s market value that can be offered as a loan amount. The LTV usually ranges from 75% to 90% (depending on the policy of the lender). Also, the loan value for a commercial property loan for salaried person can be different from a self-employed individual.
  • Tenure: The tenure is the period within which you will have to repay the loan. It can usually range up to 15 years (depending on the lender’s policy). You must choose a tenure that you will be able to repay conveniently without any default.
  • Technical specifications of the property: Your lender will check the technical specifications of the property to ensure that the property complies with all the safety and environmental regulations. These specifications usually include fire safety measures, elevators, civic amenities, etc.
  • Property age: The age of the property is also an important factor, as most lenders prefer to fund properties that are not too old.
  • Area: The area as well as size of the property are also important. Lenders may even have a minimum property size criterion in place.
  • Developer’s profile: It is also crucial for the lender to check the property developer's profile and financial stability, especially for under-construction properties. 
  • Regulatory approvals: The property must have clearance from all government and municipal departments before the lender disburses the loan. The required approvals may differ from one location to another.

You can also Check Loan Against Property without Income Proof and ITR

How to Apply for a Loan to Buy Commercial Property?

Follow the steps given below to apply for commercial real estate construction loans or other forms of commercial property loans.

  • Find a lender that offers this type of loan.
  • Once decided, fill out an application form online or offline and provide the documentation required, such as income proof and financial statements.
  • The lender will review your application and documents to decide whether or not to approve your loan request.
  • If approved, you will need to sign a loan agreement and make a down payment.
  • Once the loan deal is finalized, the amount will be disbursed for your use.

Difference Between Commercial Property and Residential Property

  • The eligibility and document requirements may differ slightly.
  • The loan-to-value (LTV) ratio is lesser for a commercial property loan than a residential property loan. 
  • The interest rate and processing fee for residential home loans are usually lower than for commercial property loans.
  • Lenders are quite rigid about the builder's profile and reputation for commercial property (especially if the property is under construction). 
  • Commercial properties must adhere to the technical specification requirements of the lender. 
  • The commercial property builder must obtain all compulsory approvals and clearances from different authorities. There should not be a risk of demolition on the property due to any remaining approval. The same rules are applicable to residential buildings; however, they are stricter when for commercial properties.
  • The tenure for commercial property is lesser in comparison to housing loans for residential property. 
  • The loan margin is also lesser for commercial property loan as compared to housing loans. 
  • A commercial property loan is usually more expensive in terms of your monthly financial budget. However, the return on the investment in commercial property is always higher than a residential property.

Commercial Property Loan FAQs

What is commercial property loan?


A commercial property loan is a loan facility to fund the purchase of a workspace (such as office buildings, retail outlets, warehouses, factories, etc.) rather than a living space.

What is commercial property loan interest rate?


The interest rate for commercial property loans ranges from 8% to 15% p.a. currently.

Which loan is best for commercial property?


Axis Bank, Kotak Mahindra Bank, Standard Chartered Bank, and Bajaj Housing Finance offer the best commercial property loans with low-interest rates.

Do banks give loan for commercial property?


Yes, there are many banks that offer commercial property loans.

What is the interest rate for commercial property loan in SBI?


SBI offers CRE (Commercial Real Estate) loans at an interest rate of 9.35% to 10.15% p.a.

How much loan can be availed on commercial property?


The loan amount can be 50% to 55% of the commercial property’s value.

Can salaried person take commercial loan?


Yes, some lenders offer commercial property loans for salaried individuals too.

Do we get tax benefit on commercial property loan?


When you avail of a business loan to buy a commercial property (like a shop), you can claim a tax deduction at a flat rate of 30% of your taxable income invested in equipment technology, and building materials used for making repairs and renovating the commercial property.

How do commercial mortgage loans work?


Commercial property loans are used exclusively for business-related purposes or to purchase a workspace rather than as a living space.

What is the rate of interest on shop loan?


Interest rates for shop loans can range from 9.65% p.a. to 10.90% p.a.

What is the maximum amount of commercial loan?


The maximum loan amount for commercial property can be up to 55% of the commercial property’s value.

Who is eligible for commercial loan?


A salaried as well as self-employed Indian resident individual aged between 28 to 70 years with a regular income source can avail of a commercial property loan.

Is loan on commercial property taxable?


Commercial properties are capital assets and profits from their sale after 24 months are considered as long-term capital gains (LTCG), taxed at 20%. If it is sold within 24 months, it is short-term capital gains (STCG), taxed as per your tax slab.

Can I get a mortgage on a commercial property?


If you already own a commercial property, you can easily mortgage it abs to avail of a high-value loan at affordable interest rates.

What is credit score required for commercial property loan?


To qualify for a commercial property loan, you must have a credit score of at least 660.

What is the difference between commercial property loan and home loan?


Home loans are availed of for construction or purchase of a residential property. Whereas, a commercial property loan can be availed of for purchasing a workspace.