Loan Against Property For Small Or Medium Scale Business In India - Kotak Bank
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23 NOVEMBER, 2022

A loan is one of our first options when we require a sizable sum of money for an emergency. But selecting just one loan from a wide range of loans, such as personal loans, business mortgage loans, or loans secured by giving property as collateral, can be very difficult.

Loans secured by real estate are one financial instrument growing in popularity today and are predicted to take over a market value of greater than $850 billion by FY2026. Not many secured loan solutions are preferable to a property loan if you are sure you can make on-time payments for your monthly installments. You already have a good credit history. What is it, then? What advantages do property loans offer?

Loan Against Property: What Is It?

With a loan against property (LAP), you can use the depreciated value of the commercial or residential property to get cash for personal and professional needs. You can use a LAP to secure a loan by using your home, apartment, office, or retail space as collateral. Businesses can avail of this loan against property without income proof in India.

You may be certain of achieving important life goals like marriage, school, or business expansion while keeping your long-term financial security because of the simplicity of obtaining a LAP and its many advantages.

Benefits of Taking Out a Property Loan

The top 9 benefits of taking out a loan against property are listed below.

  • Lower Interest Rates

Unquestionably, one of the significant benefits of choosing a LAP is the low-interest rate. The risk element is minimal for the lenders because they have the right to file a legal claim against the property in the event of a loss. As a result, companies are happy to take a lower rate, which brings down your EMI and lessens the borrower's financial load.

  • Increased Sanction Amount

When you apply for a property loan, the bank provides you with a credit amount equal to a sizeable portion of the current market value of your property. The lender may offer a credit of up to 75% of the property value, based on the kind of property, such as residential or commercial, and the type of property. This sizeable sum can support your commercial endeavours or personal objectives.

  • Longer Period of Repayment (LAP)

You have the choice to pay back the loan over an extended length of time with a LAP. You can quickly receive a period between 10 to 20 years to repay the enormous amount, while the actual time varies from lender to lender.

With such a long repayment period, you can choose affordable monthly payments and streamline your repayment process. This unique characteristic of LAP renders it a practical and economical choice to support small enterprises with low-interest rates. You can get the LAP for this loan against property without income proof; hence, it can help your business grow.

  • Maintenance of Property

You continue to own and use the property even after you receive a loan against it. As a result, the property continues to give you its original benefits even while it is used as a loan mortgage. Whether a property is self-occupied, rented out, or commercial or residential space, you can use it as collateral for a mortgage.

  • Partially Disbursed Funds

You can only disburse a portion of your loan amount when you take a loan against property. It is called partially disbursing a loan. This feature can be beneficial if you need a loan for long-term working capital requirements, such as different project construction stages. While simply paying interest on the amount that has been issued, you can disperse various loan amounts across numerous trenches.

  • No need to visit the lender's office frequently

In the physical loan application process, you might have to go to the lender's office to submit the necessary paperwork, fix any mistakes, or finish your KYC. On the other hand, if you apply for an MSME loan online, you may do your KYC and submit your supporting papers right on the lender's website. Additionally, many of the lender's internal procedures—including the data verification—are automated. As a result, you will spend far less time & effort meeting the lender in person.

  • Unsecured Type Of Borrowing

Unlike typical business loans, MSME loans are an unsecured type of debt. It implies that to get credit, you don't have to give the lender any collateral. Because of this, MSME loans are among the easiest company loans to obtain in India. If secured MSME loans are what you're after, numerous lenders also provide those. To perhaps lower the cost of getting the loan, you might offer collateral. The lender's T&Cs and your capacity to pay back the debt determine the best MSME loan for you.

  • Quick Loan Approval

Compared to other unsecured loans, approving a LAP loan application is simpler. As previously stated, lenders are given a guarantee for the credit amount. These loans are far more readily accessible to borrowers thanks to this security.

Additionally, LAP is accessible to both the salaried class and individuals who work for themselves. The borrower only needs to provide specific evidence to the financiers (such as an AADHAR card, a copy of the property documents, proof of address, etc.) to get the loan amount sanctioned.

  • Tax Advantages

You may even receive particular tax savings on interest payments if you use the LAP loan amount for specific reasons. Suppose you use your loan for commercial purposes. In that case, Income Tax Act, Section 37(1) entitles you to tax benefits on the interest and processing fees. Similarly, utilize your loan money to buy a residential property. You may be eligible for a tax deduction of up to Rs 2 lakh under the Income Tax Act, Section 24(B). You can get these tax advantages for this loan against property without CIBIL, which can help your business grow.

If you wish to guarantee these tax advantages, you must show confirmation of your fund expenditures. Remember that if you use your loan for personal requirements, you are not eligible for these tax deductions.


A property loan is a fantastic alternative for funding various life goals for individuals and organizations. However, obtaining a loan may take a lot of work, particularly for small and medium-sized businesses. To improve your experience, check if your lender offers extra benefits like doorstep service, speedy processing, and simple documentation before choosing them.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.