A bank loan is secured by the future rent of a property owned by the borrower. This loan is available to anyone who owns a commercially rented property, while banks may have additional terms and conditions that specify who is truly qualified for the loan.
A loan against Rent Receivables is a type of personal loan that can be used to improve the condition of a property, start new projects, repair/renovation, and cover expenses such as schooling, marriage, or even assisting in business activity. The amount of the loan that has been approved can be used in almost any way.
In today's market, there are a variety of loan products to choose from. With ever-increasing financial demands, a single loan cannot meet everyone's requirements. Even for banks and financial institutions, offering tailor-made goods for diverse customers makes things easier. Loan Against Rent Receivables is one such loan instrument.
This sort of loan is intended for owners of real estate properties or commercial establishments who have rented out space or a portion of their building. For a long time, real estate has been on the rise. While there is some volatility in this market, the overall picture is positive. Many people invest in commercial properties/malls even when they are still in the planning stages in order to profit from future growth.
In both urban and rural regions, loans are provided under Loan against Rent. The security for the loan is the investment made in the acquisition of a building or the rent receivables. This sort of loan enables property owners to obtain funding based on future rents while also generating liquidity in their portfolios. This loan is available from the majority of the country's major banks. Continue reading for more information on this type of loan.
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Loan Against Rent Receivables Eligibility Criteria
The following are the general eligibility criteria used by banks when considering a Loan Against Rent Receivables:- Individuals, self-employed, HNIs, government, proprietary enterprises.
- Rent should be paid on the property.
- It is constructed in accordance with local government approvals.
- professionals and others have leased/let properties in metro/urban/semi-urban/rural locations.
- Both owners & tenant's should be creditworthiness.
How to Apply For Loan Against Rent Receivables
You can contact the bank directly by going to the branch closest to your location. A bank professional will explain the loan in detail and examine your needs as well as your current real estate assets. The bank will process your application and disburse the loan amount based on the evidence you submit.
Getting online and sending your inquiry is another option for applying. A bank representative will contact you for an initial review and then request that you submit the required documents. For this reason, several banks provide door-to-door service to their regular or premium customers. This is a more straightforward and convenient way to apply for a loan.
Most banks also have a phone center that is open 24 hours a day, seven days a week, and can be utilized to register your interest in taking out this loan. Most banks will demand the following documentation in order to take out this loan:
- A photo attached application form
- Identification and evidence of residency
- For 3 months or 6 months, a salary slip is required.
- Bank statement over the previous six months
- IT returns are filed for a period of three years.
- Deed, authorized building plan, leasing agreement, and other property documents.
Documents Required for Loan Against Rent Receivables
- Application form of loan
- Photograph
- Residence proof
- Identity proof
- Educational qualifications certificate,
- salary slip of latest 3 months and/or proof of business existence
- Form 16/ITR or latest 3 years’ Income Tax returns or business profile
- Last 3 years profit/loss and balance sheet or Latest 6 months’ bank statement
- Cheque of Processing fee cheque
- Title of ownership of property
- Property related documents
- Approved sanction/building plan
Top Banks in India Providing Loan Against Rent Receivables
The following are some of the main lenders in the country that provide this form of loan:
- SBI: Find Branches: State Bank of India Branch Locator
- HDFC Bank: Find Branches: HDFC Bank Branch Locator
- Karur Vysya Bank: Find Branches: Karur Vysya Bank Branch Locator
- Andhra Bank: Find Branches: Andhra Bank Branch Locator
- Canara Bank: Find Branches: Canara Bank Branch Locator
- Corporation Bank: Find Branches: Corporation Bank Branch Locator
- Dena Bank: Find Branches: Dena Bank Branch Locator
- DHFL: Find Branches: DHFL Bank Branch Locator
- HDB: Find Branches: HDB Bank Branch Locator
- Indian Bank: Find Branches: Indian Bank Branch Locator
- Laxmi Vilas Bank: Find Branches: Laxmi Vilas Bank Branch Locator
- LIC Housing: Find Branches: LIC Housing Branch Locator
- PNB Housing: Find Branches: PNB Housing Branch Locator
- Syndicate Bank: Find Branches: Syndicate Bank Branch Locator
- Tamilnad Mercantile Bank: Find Branches: Tamilnad Mercantile Bank Branch Locator
- UCO Bank: Find Branches: UCO Bank Branch Locator
- Vijaya Bank: Find Branches: Vijaya Bank Branch Locator
Interest Rates & Charges on Loan Against Rent Receivables
As with ordinary loans, the interest rate is decided by the amount borrowed and the length of the loan. There would be a requirement in this scenario to present rent receivable as proof of income, which would be deemed collateral. The overall amount of the loan is determined by the total amount of rent anticipated from the property.
The interest rate can be negotiated well with the banks because the amount borrowed is usually large. There is a certain amount of revenue from the property, therefore there is less risk.
- Tenure: It can vary from a 120 month / residual lease (Decided on comparing which is less)
- Loan Amount: Min 25 lakh to Max 200 crore.
- Processing Fee: From 0.5% to 1%
- Maximum Funding offered: 50 to 85% market value of the property.
Advantage of Loan Against Rent Receivables
Today, almost all banks offer a loan on rent receivables. With the rise in real estate investing, investors are continually looking for new strategies to keep as much money as possible available for a variety of purposes. The following are some of the notable advantages of this form of loan:
- Demand loans, TLs, and ODs with diminishing balances are examples of several types of Loan Against Rent Receivables.
- With various institutions, the loan amount might range from Rs 25 lakhs to Rs 200 crores.
- On this type of loan, banks provide flexible repayment alternatives. This form of flexibility is helpful to the borrower because the loan amount is far bigger than any of the normal loans.
- This form of loan can be utilized for a variety of things including personal needs.
- Even customized loan is available from the banks in case of a huge amount borrowed.
