The amount of loan is decided by bank on the basis of income of the customer and the purchase value as well as market value of the property. The property to be purchased should legally and technically be acceptable for the purpose of creating mortgage.

How Is the Loan Amount Determined?

When applying for a commercial property purchase loan, the loan amount sanctioned by the bank depends on two key criteria:

• The borrower's income, which indicates repayment capacity

• The property value, both purchase price and current market valuation

In addition, the property must meet legal and technical standards to qualify for mortgage purposes.

How Much Loan Can I Avail?

Two main aspects influence the approved loan amount:

• Loan-to-Value (LTV) Ratio: This ratio represents the percentage of the property’s value that the bank is willing to fund. In commercial property loans, LTV generally ranges from 50% to 70%, depending on:

o Property type

o Its intended use

o Loan duration

• Income-Based Eligibility: The borrower's income plays a critical role in determining loan eligibility. You can use our loan eligibility tool to check how much you can borrow based on your earnings.

What About Interest Rates?

Interest rates on commercial property loans are typically higher than residential home loans, due to the perceived increase in risk.

These loans come with floating interest rates, which means the rate is variable and changes based on external benchmarks such as:

• The Repo Rate or T-Bill Rate (for bank-linked loans)

• PLR or FRR (for loans from NBFCs or housing finance firms)

The spread/margin added to the benchmark rate stays fixed, but the final rate may change over time with fluctuations in the reference rate.

How Will I Repay the Loan?

Repayment happens through Equated Monthly Installments (EMIs). Each EMI includes a portion of:

• Principal (actual loan amount)

• Interest (cost of borrowing)

Although the EMI amount remains consistent, the principal and interest proportions vary throughout the loan term. Use our EMI calculator to understand how much your monthly payment would be.

The maximum tenure for a commercial loan is typically up to 15 years, subject to the borrower’s profile and property characteristics.

If you want to see how your loan progresses over time, check out our Amortization Calculator for a detailed breakdown.

Can There Be Co-Borrowers on the Loan?

Yes. If a property has multiple owners, it’s mandatory that all co-owners are also co-borrowers.

Additionally, co-applicants can be included to:

• Enhance loan eligibility through combined incomes

• Reflect co-ownership status

That said, banks generally allow only immediate family members to be added as co-borrowers.

Can I Repay the Loan Early?

Yes, many lenders permit prepayment or foreclosure of commercial loans.

• Partial Prepayment: Most financial institutions allow you to prepay up to 25% of the outstanding principal per financial year without penalty.

• Foreclosure: If the loan is held solely in an individual’s name, foreclosure charges typically do not apply.

However, if the loan involves a business entity (as is often the case with commercial loans), foreclosure may incur a fee between 2% to 4% of the repaid amount.

When you make a prepayment, you can choose to:

• Reduce your remaining loan term, or

• Lower your monthly EMI

What Are the Associated Costs?

Banks and financial institutions apply a processing fee when evaluating your loan application. These are generally higher for commercial property loans than residential ones, ranging from 0.25% to 1% of the disbursed amount.

We work directly with lenders to help you negotiate better rates, and wherever possible, offset a portion of these fees, saving you money.

What Does My EMI Consist Of?

Every EMI includes two portions:

• Interest

• Principal repayment

The share of each component changes over the course of the loan. In early EMIs, interest makes up the larger portion, while later installments are more principal-heavy.

To view your EMI composition month by month, download a detailed amortization schedule using our online calculator.