A Loan Against Commercial Property (LACP) is a secured loan that allows you to monetize the value of your commercial real estate. Whether you own a shop, office space, warehouse, or commercial land, you can pledge the property as collateral and raise funds for business expansion, working capital, or personal needs.
Key Highlights of Loan Against Commercial Property
| Feature | Details |
|---|---|
| Loan Type | Secured loan |
| Eligible Property | Shops, offices, warehouses, clinics, commercial plots |
| Loan Purpose | Business expansion, working capital, debt consolidation, personal needs |
| Loan Amount | ₹10 lakh to ₹25 crore+ (based on property value and profile) |
| Loan-to-Value (LTV) | Up to 55–70% of the property’s current market value |
| Interest Rate (2025) | ~9% to 13.5% p.a. |
| Tenure | Up to 15 years |
| Collateral Required | Commercial property with clear legal title |
| Ownership Type | Self-owned property by individual, partnership firm, or company |
| Repayment | Monthly EMIs (flexible repayment options available) |
| Processing Time | 7–15 working days (subject to valuation and verification) |
| Top Lenders | HDFC, ICICI, SBI, Bajaj Finserv, Axis Bank |
What is a Loan Against Commercial Property?
Loan Against Commercial Property (LACP) is a secured loan where a borrower pledges their self-owned commercial real estate—such as an office, shop, warehouse, or clinic—as collateral to raise funds. This type of loan is typically offered by banks and NBFCs to business owners, self-employed professionals, and companies who need capital for business expansion, working capital, or personal financial needs.
The loan amount is usually determined by the market value of the property, and lenders offer up to 70% of the property’s value as loan. Interest rates are generally lower than unsecured loans, and repayment is done through monthly EMIs over a flexible tenure of up to 15 years.
Loan Against Commercial Property Interest Rate by Top Banks
| Lender | Interest Rate Range (% p.a.) |
|---|---|
| Axis Bank | 10.50% – 10.95% |
| Bank of Baroda | 10.85% – 16.50% |
| Bank of India (Floating, Commercial Property) | 9.60% – 11.35% |
| Bank of India (Fixed, Commercial Property) | 11.90% – 13.65% |
| Bank of Maharashtra | 10.45% – 11.95% |
| Central Bank of India | 9.75% – 13.00% |
| HDFC Bank | 9.50% – 11.00% |
| ICICI Bank | 10.85% – 12.50% |
| IDFC First Bank | 9.00% – 16.50% |
| Kotak Mahindra Bank | 9.15% onwards |
| Punjab National Bank | 10.40% – 12.75% |
| State Bank of India | 9.20% – 10.50% |
| Union Bank of India | 10.45% – 13.10% |
| Bajaj Finance | 9.00% – 12.00% |
| Tata Capital | 9.00% onwards |
| PNB Housing Finance | 9.25% – 15.00% |
| LIC Housing Finance | 9.50% – 11.55% |
| L&T Finance | 9.50% onwards |
| Godrej Housing Finance | 9.75% onwards |
Eligibility Required for Loan Against Commercial Property
| Criteria | Details |
|---|---|
| Applicant Type | – Self-employed individuals (business owners, professionals) – Proprietors, partnership firms, LLPs, or private limited companies – Salaried individuals (if they own commercial property) |
| Age | – Minimum: 25 years – Maximum: 60–65 years (at loan maturity) |
| Property Requirements | – Commercial property (office, shop, warehouse, clinic, etc.) – Legally owned, clear title, dispute-free – Located in a lender-approved area |
| Income Criteria | – Stable & verifiable income – ITRs, bank statements, audited financials – Minimum net annual income as per the lender’s policy |
| Credit Score | – Minimum CIBIL score: 650–700 – Higher score = better chances & lower interest |
| Documentation | – Valid ID & address proof – Income proof (ITRs, balance sheet) – Complete property documents |
Suggested Read: Loan Against Property 101
Processing and Other Charges for Loan Against Commercial Property
| Charge Type | Typical Range / Details |
|---|---|
| Processing Fee | 0.5% – 2% of the loan amount (varies by lender) |
| Legal & Valuation Charges | ₹5,000 – ₹15,000 (approx.) or as per actuals |
| Administrative Charges | ₹2,000 – ₹10,000 (some banks waive this) |
| Documentation Charges | ₹1,000 – ₹5,000 (may be clubbed with processing fees) |
| Prepayment Charges | – Floating rate loans: Usually nil for individuals – Fixed rate loans: 2%–4% of prepaid amount |
| Late Payment Fee | 2% – 3% per month on overdue EMI |
| Stamp Duty | As per state-specific laws (usually 0.1% – 0.5% of loan value) |
| Conversion Charges | ₹5,000 – ₹10,000 (if switching from fixed to floating rate) |
Documents Required for Loan Against Commercial Property
| Category | Documents |
|---|---|
| Identity Proof | PAN Card, Aadhaar Card, Passport, Voter ID |
| Address Proof | Aadhaar Card, Utility Bill, Driving License |
| Photographs | Recent passport-sized photographs |
| Income Proof | ITRs (last 2–3 years), Audited financials, Bank statements (6–12 months) |
| Business Proof | GST Registration, Shop Act License, Company PAN, Incorporation Certificate |
| Salary Proof (if salaried) | Salary slips (3–6 months), Form 16, Employment letter |
| Property Documents | Title deed, Sale deed, Tax receipts, Sanctioned plan, EC, Completion cert. |
| Other Documents | Filled application form, Loan declaration, Board resolution (if company) |
How to apply for Loan Against Commercial Property?
Follow these steps to apply for loan against commercial property.
- Check Eligibility
Age (25–65), income proof, credit score (650+), clear ownership of property.
- Compare Lenders
Interest rate, LTV ratio, tenure, processing fees.
- Gather Documents
KYC, ITRs, bank statements, property papers, business proof.
- Submit Application
Online or offline form submission with required documents.
- Property Valuation & Legal Check
Lender verifies property and documents, assesses market value.
- Loan Sanction
Credit check, income review, sanction letter issued with terms.
- Agreement & Disbursement
Sign documents, submit cheques/NACH, and receive funds in the account.
Suggested Read: Home Loan vs LAP
Who Can Apply for Loan Against Commercial Property?
| Category | Eligibility Criteria |
|---|---|
| Self-Employed Individuals | Business owners, consultants, doctors, architects, or freelancers with steady income |
| Proprietors & Partnership Firms | Must own the commercial property and have stable business operations |
| Limited Liability Partnerships (LLPs) | Registered LLPs with valid financial documentation and property ownership |
| Private Limited Companies | Must own the commercial asset and demonstrate repayment capacity |
| Salaried Individuals | Allowed by some lenders if they own a commercial property and meet income criteria |
Also Read: LAP Over Personal Loan
Calculate EMI For Loan Against Property
How this Calculator Works – A Case Study
Scenario:
Mr. Rajesh Mehta, a 38-year-old business owner in Bangalore, plans to expand his logistics business. He owns a commercial warehouse and decides to take a loan against the property to raise ₹80 lakhs for adding new delivery vehicles and upgrading infrastructure.
How He Uses the EMI Calculator:
Rajesh visits the bank’s website and inputs the following in the EMI calculator:
| Input | Value |
|---|---|
| Loan Amount | ₹80,00,000 |
| Interest Rate | 8.5% p.a. |
| Loan Tenure | 20 years |
The calculator instantly shows:
- Monthly EMI: ₹69,426
- Total Interest Payable: ₹86.62 lakhs
- Total Repayment Amount: ₹1.66 crores
Outcome:
- Rajesh confirms he can comfortably manage the EMI from business cash flow.
- He compares this with a 15-year tenure and sees EMI goes up, but total interest reduces.
- He uses the calculator to make an informed decision before applying.
Pros and Cons of a Loan Against Commercial Property
Here is a crisp pros and cons table for a Loan Against Commercial Property:
| Pros | Cons |
|---|---|
| Lower interest rates than unsecured loans | Risk of losing property on default |
| High loan amount (60–70% of property value) | Lengthy approval and documentation process |
| Long repayment tenure (up to 15–20 years) | High processing and legal fees |
| Flexible use of funds | Floating rates can increase EMI |
| Retain ownership and usage of property | Limited by property’s market valuation |
| Tax benefits for business use | Credit score impacted by missed EMIs |
Suggested Read: Loan Against Commercial Property| IIFL Home Loan
Tax Benefits of Loan Against Commercial Property
| Benefit | Explanation |
|---|---|
| Interest Deduction for Business Use | Interest paid on loan used for business-related expenses can be deducted from taxable business income (Section 37(1)). |
| Interest Deduction for Property Use | Interest on loan for buying, constructing, repairing, or renovating commercial property can be deducted up to Rs. 2 lakh per year (Section 24(b)). |
| Pre-Construction Interest | Interest paid before the property is ready can be claimed over 5 years once property is complete. |
| Loss from Property Set-Off | If expenses (like interest) exceed rental income, losses up to Rs. 2 lakh can reduce other income; remaining losses can be carried forward for 8 years. |
| No Deduction on Principal | Principal repayments of the loan do not get any tax deduction. |
| No Benefits on Personal Use | No tax benefits if loan funds are used for personal expenses like marriage, education, or vacations. |
Best Use Cases of Loan Against Commercial Property
| Use Case | Why It’s Best |
|---|---|
| Expanding Your Business | Access large funds by using your property as collateral to finance business growth, buy equipment, or open new branches. |
| Working Capital Needs | Manage day-to-day operational expenses, payroll, or inventory stocking without selling assets. |
| Refinancing Costly Loans | Pay off high-interest business loans by availing a lower-interest LACP, reducing your total outgo. |
| Renovation or Upgrading Property | Fund major repairs, renovations, or upgrades of a commercial property and claim tax benefits on the interest paid. |
| Buying New Commercial Asset | Use funds to purchase another shop, office, or warehouse to expand property portfolio or rental income. |
| Meeting Emergency Expenses | Quick access to substantial funds for emergencies like legal liabilities, business downturns, or unforeseen cash needs. |
| Debt Consolidation | Combine several loans into one by securing a larger amount against commercial property, making repayment manageable. |
| Tax Saving | Interest paid can reduce your taxable business profits or be claimed under Section 24(b) if used for property-related purposes. |
Suggested Read: LAP Over Business Loan
”A Loan Against Commercial Property is widely regarded as one of the most efficient financing tools for business owners seeking substantial capital. Its ability to offer high-value funding at competitive interest rates, coupled with flexible end-use, makes it a preferred choice for business expansion and working capital requirements.”
– Anand Choubey, LAP Expert, Credit Dharma
Conclusion
A Loan Against Commercial Property (LACP) is a smart way to leverage your real estate for substantial funding at attractive interest rates. Whether you’re expanding your business, investing in a new venture, or managing working capital, LACP offers higher loan amounts, longer tenures, and flexible usage.
Get Up to 70% Funding on Your Commercial Property!
Frequently Asked Questions
A loan against commercial property is a secured loan where you pledge a commercial asset—such as an office, shop, or warehouse—as collateral to get funds for business or personal use.
Any self-employed individual, business owner, or professional aged between 25 and 65 years, with a stable income and clear ownership of the commercial property, is eligible.
Banks and NBFCs typically accept:
– Shops and retail outlets
– Office spaces
– Warehouses and godowns
– Clinics and commercial buildings.
The property must be legally owned, dispute-free, and located in an approved area.
The loan amount depends on the property’s market value and your income. Most lenders offer up to 70% of the property’s value as the loan (Loan-to-Value ratio).
Yes, the loan amount can be used for both business and personal purposes, such as working capital, expansion, education, or wedding expenses.
Interest rates usually range from 9% to 13.5% per annum, depending on the lender, loan amount, and borrower’s credit profile.
You will need:
– KYC documents (PAN, Aadhaar)
– Property papers (title deed, tax receipts)
– Income proof (ITRs, bank statements)
– Business proof (GST, registration) if self-employed
Yes, most lenders allow partial or full prepayment. Some may charge a prepayment penalty depending on the loan terms and type of borrower.
In case of default, the lender has the legal right to seize and auction the pledged commercial property to recover the loan amount.
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