Loan Against Property: Eligibility, LTV and Documents
A loan against property (LAP) is a secured loan raised against real estate you
already own. It is the cheapest large sum most individuals and small businesses
can borrow without selling an asset — and the most consequential, because
the security is usually the family home or the business premises.
That trade-off deserves stating plainly. An unsecured
personal loan at a higher rate risks your credit
record. A LAP at a lower rate risks the property itself. The cheaper money is
not automatically the better decision.
How much you can raise
LAP funding is markedly more conservative than a home loan, because the lender
is financing existing equity rather than a purchase, and must allow for the
property being harder to sell.
| Property type | Typical LTV |
|---|
| Self-occupied residential | 60% to 70% of assessed market value |
| Rented or vacant residential | 55% to 65% |
| Commercial | 50% to 60% |
| Industrial or special-use | 40% to 50%, and many lenders decline |
The figure that matters is the lender's own assessed value, not
the market price you have in mind. Valuations frequently come in below owner
expectations, and the loan is calculated from the lower number.
Who is eligible, and which properties qualify
- Applicant — salaried, self-employed professional or business owner, typically 21 to 65 at maturity.
- Ownership — clear, marketable title. Every co-owner must join the application, without exception.
- Property — constructed and approved, with a chain of title the lender can verify. Agricultural land, disputed property and unauthorised construction are generally excluded.
- Income — documented ability to service the EMI. Owning valuable property is not by itself sufficient.
- Credit score — 700+ expected; 750+ for the best rates.
Rates, tenure and end use
LAP rates generally run from about 7.5% to 24% per annum —
above a home loan, well below unsecured borrowing — with tenures of up to 20
years. Funds can be used for business expansion, a medical
emergency, education, a wedding or debt consolidation. Lenders will not fund
speculative purposes, and will ask you to state the end use.
Consolidating expensive unsecured debt into a LAP is a genuine use case: replacing
22% credit card debt with 11% secured debt can transform a monthly budget. It also
converts an unsecured problem into one that can cost you the house, so it is only
sound if the underlying spending pattern has actually changed.
Prepayment: the rule turns on purpose, not product
The RBI's prohibition on foreclosure and prepayment charges applies to
floating-rate term loans sanctioned to individual borrowers for
non-business purposes. A LAP taken for personal reasons therefore
usually attracts no prepayment penalty, whereas the same product taken for
business purposes, or in a company's name, commonly does — often 2–4%
of the outstanding.
Because the stated end use decides which side of that line you fall on, get the
prepayment terms in writing in the sanction letter rather than relying on the
general rule.
Documents you will need
| Category | Accepted documents |
|---|
| Identity and address | PAN (mandatory), Aadhaar, passport, voter ID or driving licence for all co-owners |
| Income — salaried | 3 months' salary slips, 6 months' bank statements, Form 16 |
| Income — self-employed | 2–3 years' ITR with computation, audited financials, 12 months' bank statements |
| Property | Title deeds and prior chain, approved plan, occupancy certificate, latest tax receipts, encumbrance certificate, society NOC |
| Existing debt | Sanction letters and statements for current loans, including any charge already on the property |
Before you pledge the property
LAP applications fail for two distinct reasons: the property or the borrower.
Title defects and missing approvals are one class of problem. The other is the
credit report — and on a secured loan of this size, errors are expensive
rather than merely inconvenient, because a weaker report means a lower LTV and a
higher rate on a large, long-dated liability.
Since every co-owner must join the application, every co-owner's report is
assessed. Read them all before you apply. Your score is free from
CIBIL,
Experian,
Equifax and
CRIF High Mark.
We analyse the full report and
dispute the entries that are wrong
— worth doing before you put a property on the line.
