What is a loan against property?
A loan against property (LAP) lets you borrow against property you already own, such as your house, a shop, an office or a factory, while you continue to use it. The property stays mortgaged to the lender until the loan is repaid. Because the loan is secured, lenders are generally willing to lend larger amounts over longer periods than they would on an unsecured basis.
For small business owners and self-employed professionals in India, LAP is one of the most common ways to raise long-term funds, often using the family home or the business premises as security.
How lenders decide the loan amount
The sanctioned amount is the lower of two numbers: a share of the property's assessed market value, and what your income can comfortably repay.
- Property side. The lender's valuer and lawyer assess market value and title. Residential property is usually funded at a higher share of its value than commercial or industrial property, and self-occupied property is often viewed more favourably than vacant property.
- Income side. Lenders look at your ITRs, business turnover, bank statements and existing EMIs. For self-employed borrowers, the income declared in tax returns and the banking pattern carry the most weight.
Illustrative: a shop valued at ₹1 crore may support a loan of ₹50–60 lakh on the property side, but if your income supports EMIs on only ₹40 lakh, the sanction will be closer to ₹40 lakh.
Choosing the right structure
| Structure | How it works | Suits |
|---|---|---|
| Term loan | Lump sum with fixed EMIs | One-time needs such as expansion or education |
| Dropline overdraft | Limit reduces each month; interest only on usage | Businesses with uneven cash flows |
| Lease rental discounting | Loan repaid from rent receipts | Owners of leased commercial property |
Banks, housing finance companies and NBFCs all offer LAP, each with a different appetite for property types, locations and borrower profiles. Ramasure compares offers from 40+ banks and NBFCs so you can see which lenders genuinely fit your property and income.
Things to compare before you choose
- All-in cost. Look at the APR in the Key Fact Statement, which includes processing and valuation charges.
- Rate resets. Understand how and when a floating rate changes.
- Part-payment flexibility. This is useful if your business earns seasonal surpluses.
- Mortgage type. Check whether the lender needs a mortgage by deposit of title deeds or a registered mortgage, and the stamp duty this attracts in your state.
- Exit terms. Note any closure charges and how quickly original documents are returned once you repay.
