Financial instruments such as loans has made our lives so much easier in the last decade. A loan makes it possible for us to achieve our dreams, be it purchasing your dream car or a house. Banks have launched new loan schemes over the years to suit the financial needs of its customers and one such loan is loan for commercial shop purchases. This loan offers finances to an individual who wants to purchase a commercial property to set up their shop or business. Read on to know more about Loan for commercial shop purchases in India.
Difference between loans for residential property purchase and commercial shop purchase
There are quite a lot of differences between loans for residential property purchase and loans for commercial property purchase in India. Listed below are the major differences between the two.
LTV ratio- LTV ratio or loan-to-value ratio describes the ratio of the loan to the value of the property purchased. While for residential properties, the LTV ratio is around 75-85%, for commercial properties, the ratio is much lesser at 55%.
Rate of interest- The rate of interest is higher for commercial property loans when compared to residential property loans.
Loan tenure- The maximum loan tenure for commercial properties is usually restricted to 10 years while the loan tenure offered for residential properties can go up to 25-30 years.
Processing fee- The processing fee charged for commercial property loans is much higher when compared to the processing fee for residential property loans. The usual processing fee for residential property loans is capped at Rs.10,000 while the standard processing fee for commercial loans is 1% of the loan amount.
Loans for purchase of Commercial Shops/Properties in India
Listed below are some the popular loans that offers finance for purchase of commercial shops/properties in India:
Indian Bank My Own Shop loan
If you want to purchase a shop or commercial space of your own to give wings to your business, the Indian Bank My Own Shop Loan is the ideal option for you. Some of the notable features of this loan are:
- If you are an individual, professional, or self-employed individual under the age of 50 years, you can apply for this loan.
- This loan is also available for public/private limited companies, propriety firms, and registered partnership firms that have been in the business for not less than 3 years.
- You can take this loan to renovate, purchase, or construct a commercial space for your business.
- This loan will offer you funding up to a maximum amount of Rs.50 lakh.
- This loan comes with a 25% margin which is the promoter’s contribution.
- The loan can be repaid in a maximum term of 120 months.
- The security to be given for this loan is personal guarantee of the directors/partners, or equitable mortgage on the commercial space to be purchased.
ICICI Bank Office Premises loan
The Office Premises loan offered by ICICI Bank can be availed if you are looking to own an office space for your business. This loan can be taken to not only renovate or purchase an existing office property but also to construct one as per your requirements.
PNB Housing Commercial Property loan
Punjab National Bank (PNB) offers a specialized commercial property loan which you can take to construct or purchase commercial property. The notable features of this loan are as follows:
- You can avail this loan if you are a salaried or non-salaried professional or non-professional under the age of 50 years.
- Partnership firms and corporate bodies which have been running successfully for not less than 3 years, are also eligible to apply for this loan.
- The floating rate of interest applicable on this loan ranges from 10.25% to 11.10%.
- The maximum amount that can be obtained under this loan scheme is limited to 70% of the property purchase price.
- The collateral/security applicable for this loan would be the property being purchased using the loan or any other security that the bank considers fit. The bank may require you to provide an additional or interim security as well.
- Under this loan, you, the borrower, will be expected to contribute a minimum of 30% of the property cost, including registration charges and stamp duty.
- The loan amount will be disbursed after the bank has evaluated the property and approved all legal documentation.
- The maximum loan repayment period allowed is 15 years. Repayments can be done via electronic clearing system (ECS) or post-dated cheques.
HDFC Non-residential Premises Loan
If you are a self-employed professional or businessman and want to set up a workplace of your own, the HDFC Non-residential Premises Loan can help you achieve that goal. Some of the defining features of this loan are as follows:
- This loan can be taken to buy an existing or new office/clinic. It can also be taken to renovate, extend construct an office space or clinic.
- Interest rates for this loan range from 9.65% p.a. to 10.90% p.a.
- You can apply for this loan either individually or jointly.
- Self-employed professionals or non-professionals can apply for this loan.
- The maximum loan tenure of this loan is 15 years.
- This loan can also be taken to transfer an existing outstanding loan with another bank/NBFC.
- This loan can be applied for with minimal documentation.
- In addition to the funds, HDFC Bank will also offer you expert technical and legal guidance to choose a suitable property for business purposes
- HDFC’s widespread branch network enables you to have your loan services from anywhere in India.
DHFL Commercial Property Purchase Loan
If you want to purchase a commercial space like a shop, office, clinic, etc., this loan from DHFL is an ideal option. Some of the features of this loan are:
- A maximum loan tern stretching up to 15 years.
- The primary collateral to be provided under this loan would be the immovable property that is being bought.
- This loan will be available to salaried and self-employed individuals, partnerships, proprietorships, limited liability partnerships, limited companies, and private limited companies.
- A processing fee of 1% to 2% plus GST will be levied on this loan.
Bajaj Finserv Loan For Shop
Commercial enterprises like shops require funds from time to time for routine expenses or even for expansion. If you are an existing shop owner or wish to purchase a commercial space to open a shop, the Bajaj Finserv Loan for Shop can help you on your way. Here are some features of this loan:
- This loan is available for amounts up to Rs.30 lakh.
- This loan can be used to renovate an existing commercial space (shop/store), expand a current store to newer areas, and even purchase a new shop/commercial space.
- This loan can be availed without you having to provide any collateral towards the loan.
- This is a flexi-loan which means that you can withdraw as much as you require from the total loan amount. Interest will be charged only on the amount withdrawn and not the entire disbursed amount. Also, you can only pay the interest in EMIs, and repay the principal amount as per your convenience.
- The application process requires only 2 documents
- Quick loan approval within 24 hours.
- Existing customers can avail pre-approved loan offers from Bajaj Finserv.
IDBI Bank Commercial Property Purchase
This loan from IDBI can be taken if you want to purchase a fully-built, or under-construction commercial property. Some of the notable features of this loan are as follows:
- Loan amount of up to Rs.5 crore, and in some cases, above Rs.5 crore.
- Loan quantum provided will be the lower of up to 55% of market value of property to be purchased or 65% of its registered value (incl. stamp duty, registration charges).
- If you are a salaried applicant (resident/non-resident) over the age of 22 years you are eligible to apply for this loan
- Interest rates on this loan are:
- PSL - 8.85% + 1.90% = 10.75%
- Non-PSL – 8.85% + 2.15% = 11%
- If you are a self-employed professional or non-professional between the ages of 25 years and 65 years, you are eligible to apply for this loan.
- To apply for this loan, you will need to provide liquid collaterals approved by the bank.
- Some of the basic documents to be provided to apply for this loan include identity proof, address proof, salary slips and tax returns, bank statements, Form 16 and business balance sheet statement, among others.
It is very important to do your research before choosing a loan for commercial shop purchase. Though this kind of loan is much more expensive when compared to loan for residential property, the returns from the commercial property investment will make up for it.
FAQs on Loans for Commercial Shop Purchases
- How difficult is it to get a commercial loan in India?
It can be very hard to get a commercial loan if you have a poor credit score. If you have a good score and a credit history, you can easily get a commercial loan.
- What are the differences between a commercial loan and a residential loan?
A commercial loan loans is given to a business owner for the person to finance their business. A residential loan is given to all homeowners for mortgage financing.
- What is the interest rate that HDFC offers for a commercial loan?
The interest loan for a commercial loan through HDFC Bank is 15.65% to 21.20%
- How are figures for commercial loan rates determined?
The loan issuing authority will look into your personal credit rating and also the rating of your business. This will affect the interest rate on your commercial loan and also the term of the loan.
A GST rate of 18% will be applicable on banking services and products from 01 July, 2017.