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  • SBI Loan Against Property

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  • When it comes to taking a loan that is not slaved to a purpose like a home or a car loan, the first thing that comes to mind is a personal loan. But there is a serious limitation on these loans and that is the amount that can be borrowed. What happens if the loan you need is a big amount and a personal loan just can’t cover it? The answer can be SBI’s loan against a property. This loan also does not require that there be a specific purpose attached to the money being borrowed. The loan that SBI offers against properties can go from Rs. 25 lakhs to over Rs. 1 crore depending on certain conditions set forth by the bank. These loans can also be repaid over a comfortable period ranging from 5 years to 10 years. Another thing that these loans offer is complete transparency which means that there are no hidden charges levied.

    Types of Loans

    There are various types of loans that the bank offer under the preview of loans against properties. Some of these loans are general loans against properties while other are more specific about the people who can actually take the loan. Even the approach to taking these loans can differ from one loan to another.

    What is Loan against Property?

    This is a simple loan that can be taken by providing a property to secure it. It is available to all property owners and has the following features.

    Loan against Mortgage of Immovable Property

    This is a loan that can be taken by anyone who owns property in a city and is in need of money urgently. The main features of this loan are:

    • The loan amounts are decided based on the classification of the city.
    • Tier I and II cities have a maximum loan amount of Rs. 2 crore while other cities have a limit of Rs. 1 crore on the loans.
    • The minimum amount that can be borrowed is Rs. 25,000.
    • For certain states the maximum amount available is Rs. 50 lakhs.
    • The margin for this loan is 40% of the market value of the property.
    • The repayment period for this loan can extend up to 120 months.
    • There is no prepayment charge for this loan.
    • It also comes with a maximum processing fee of Rs. 50,933

    Rent Plus

    This is a loan that is meant mainly for those individuals who own commercial complexes or apartment buildings and want to take a loan against said property to be paid back through future income that will be earned from renting the place out to tenants. The salient features of this loan are:

    • The maximum amount that can be borrowed if the property is in a metro city is Rs. 7.5 crores.
    • The maximum loan amount for all other cities is Rs. 5 crores.
    • The minimum amount that can be borrowed under this scheme is Rs. 50,000.
    • The properties that are used to secure these lease will have to be compliant with SARFAESI rules.
    • The property also cannot be rented to any institution that is part of the social infrastructure. This includes schools, orphanages, hospitals, nursing homes, etc.
    • The margin that is fixed for this loan is 25% of the amount borrowed.

    How is the Loan amount decided?

    There is a different technique that is used to determine the loan amount for each of the loans offered by SBI. There can be a variety of factors that can affect the loan amount and they can range from the city where the property is located, the income of the applicant and even the value of the property itself. Here is a general idea of how the following loan amounts are decided.

    General Loan against Property

    For a general loan against the property the amounts that can be borrowed are Rs. 25,000 to Rs. 1 crore but it is decided based on the following criteria.

    • The bank will only lend an amount up to 60% of the market value of the property.
    • The amount for salaried individuals can be calculated by multiplying the net monthly income by 24. The income taken for this calculation is the income minus any taxes and deductions that are made.
    • For self-employed individuals, the calculation is twice the net annual income. The income taken into consideration here is the one shown on IT returns minus the tax paid.

    Loan against Mortgage (LAM) of Immovable Property

    For this type of a loan, the amount that can be borrowed will range from Rs. 25,000 to Rs. 2 crore. The maximum amount will vary based on the city where some cities will get a limit of Rs. 1 crore and others Rs. 50 lakhs. Other calculations that can be used to determine the amount can be:

    • The loan amount can be 60% of the market value of the property.
    • The EMI (Equated Monthly Instalments) should not exceed 50% of the net monthly income.

    Rent plus

    In the case of rent plus loans, the maximum amount that can be borrowed ranges from Rs. 5 crore to Rs. 7.5 crore. The calculations that the bank may use to arrive at the amount that can be borrowed are:

    • The lowest of
      • 75% of the resale value of the property. The value will be determined by someone appointed by the bank.
      • 75% of the rent that will be received for the duration of the lease or rent agreement, minus any deposits and taxes applicable.
      • The maximum amount that can be borrowed under the scheme.

    Eligibility criteria for SBI Loan against Property

    There are certain eligibility criteria that need to be met for each of the loans on offer by SBI and these are:

    • Anyone who is either salaried or self-employed can apply for these loans.
    • Even those who work in the agricultural industry can apply for the loan against properties.
    • The applicant will have to be under the age of 60 years.
    • For loan against mortgage of immovable properties the applicants will need to have a net monthly income of Rs. 25,000 or more if they are salaried.
    • For the same loan, self-employed individuals will need to have a net annual income of more than Rs. 3 lakhs.
    • In the case of a regular loan against property, the net monthly income needs to be at least Rs. 12,000 or more for salaried individuals and for self-employed individuals it needs to be a minimum of Rs. 1.5 lakhs per annum.
    • In case of the Rent Plus loan, only those who rent their property to banks, MNCs or large or medium sized companies can apply for the loan.

    Loan against Property Interest rates for SBI

    The interest rate charged on these loans is calculated by adding an additional amount to the base rate being offered by the bank. The current base rate for SBI is 9.7% per annum which means that the interest charged is:

    Loan against mortgage of immovable property

    • 12.60% per annum (base rate + 2.9%) for loans of up to Rs. 1 crore.
    • 12.85% per annum (base rate + 3.15%) for loans that exceed Rs. 1 crore.

    Rent Plus loans

    • 12.95% per annum (base rate + 3.25%) for loans in both metro cities (up to Rs 7.5 crore) and non-metro cities (up to Rs. 5.5 crore).
    • For cities that are not included in the above criteria the interest rates are 13.10% per annum (base rate + 3.40%)

    Loan against Property

    • In the case of a loan against property the base rate being offered by the bank is 9.85% and the interest rate is the base rate plus 2.50% above the floating base rate.
    • This interest rate is also applied on a daily or monthly reducing balance basis.

    One thing should be kept in mind is that the interest rates are subject to banks regulations and can change without notice, hence it is always a good practice to check the current rates with the bank before applying for the loan.

    SBI Loan against Property Calculator

    The SBI loan against property calculator can be an invaluable tool in helping you understand the payments that will be made every month. The first step would be to collect all the information that will be need. This will be:

    • Amount you want to borrow
    • Interest rate being offered
    • Processing charges for the loan
    • Duration of the repayment period in months.

    Assuming that you wish to go in for the loan and want to borrow Rs. 30 lakhs and pay it back over a period of 75 months (6 years). The interest rate being offered by the bank is 12.5% per annum and the processing fee is 2% of the loan amount.

    For this loan the processing fee will be Rs. 50,000 since 2% of this amount is Rs. 60,000 which is Rs. 10,000 more than the maximum processing fee that can be applied to the loan. Using the calculator you can ascertain that over a period of 7 months you will have to pay an EMI of approximately Rs. 58,000 to pay back the loan. The amount that you will pay as interest will be approximately Rs. 13.3 lakhs.

    Conditions for the Loan

    There are certain conditions that the bank puts forth for these loans and they are:

    • While there are no restrictions on how the money from a loan against a property is used, if the amount borrowed is more than Rs. 25 lakhs, a purpose for the loan needs to be provided.
    • With large loan amounts, the bank will not permit the money to be used to invest in markets or on speculations related to real estate.
    • They also require that the borrowers be the owners of their property. If they are not then the actual owner will have to agree to be a guarantor for the loan.
    • If applicants want a higher loan amount, they can also add the income of their spouse to their own for consideration.

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