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Loan Against PropertySECURED LOAN

Index

Meaning Features & Benefits ProcessEquitable v/s

Registered Mortgage

Qualification/

Eligibility criteriaDocumentation Loan to Value ratio Tenure and ROI

Eligibility Calculations

Banks/NBFC partners

FAQs

MeaningWhat is it all about?

What is Loan against property?

• Loan against property is a Secured Loan, which means that the property actsas security for the loan. In case of loan default the property can be attachedto the bank and could be auctioned or sold to recover the loan amount due.

• It is precisely what the name implies a loan which can be availed by keepinga property as security. Banks and NBFC’s offer this loan against a property,which can either be a residential/commercial building or a piece of land.The loan can be availed by mortgaging the property with the bank.

Benefits Low interest rates and processing fees than unsecured

loans Longer duration loans Higher loan amount since mortgage backed loan

Uses Starting a new business or business expansion via

mortgage Wedding Unexpected huge expenses Credit history issues Unstable employment

Features & Benefits

LAP Process

Application form & Document

SubmissionCibil report check

Residence & Office verification

Eligibility calculation

Legal & Technical Valuation

Personal DiscussionCredit decisionOffer

Letter/Sanction letter

Submission of Property documents

& legal check

Registration of property documents

Signing of agreements and

submitting PDCs/ECS mandate

Disbursement

Customer segment

SalariedSelf Employed Non Professional

Self Employed Professional

Private Limited Proprietorship Doctors

Limited Partnership/LLP Architects

Government companies Private Limited Chartered Accountants

Other companies Limited

Deemed Limited

Tripartite Agreement

• The tripartite agreement is a key legal document involving the buyer, lender and the builder.It clarifies the status of all parties involved.

Equitable v/s Registered Mortgage

• In an Equitable mortgage, the owner has to transfer his title deed to the lender, therebycreating a charge on the property. The owner also orally confirms the intent of creating acharge on the property. An equitable mortgage is also known as an implied or constructivemortgage. No legal procedure is involved in an equitable mortgage, but it is consideredmortgage in the interest of justice (under equity). The borrower obtains money from thebank/lender with an agreement that his property, on which the equitable mortgage iscreated, will act as security for the loan.

• The borrower has to submit his title deed to the lender as security for the money borrowed.

• No formal, legal document is executed or registered in the records of the registrar, but it canbe created at notified places. Stamp duty and charges are comparatively low, relative toa registered mortgage.

Registered mortgage is required to be created:

• When original title deed is not available (if it is lost or in case of ancestral property, wheretitle deed is not available).

• Equitable mortgage can be created in notified towns only, if mortgage is required to becreated in a town which is not notified, registered mortgage is required to be created.

• In a registered mortgage, the borrower has to create a charge on the property with thesub-registrar through a formal, written process, as a proof of transfer of interest to thelender as security for the loan. Registered mortgage is also known as ‘Deed of Trust’.

• A registered mortgage meets all the necessary legal requirements to create a mortgageor a charge. If the borrower repays the loan according to the terms and conditions of theLAP agreement, the title of the property is given back to the borrower. The rights of thelender (as created during the legal process) will stand null and void on the property.However, if the borrower fails to fully repay the loan (i.e. interest plus the principalcomponent), the lender will have the right to take possession of the property.

DocumentationWhat do I need to submit?

Salaried Individual

Customer KYCPan Card/Valid Passport/Voter ID Card/Valid Driving Licence

Aadhaar Card/Electricity/Phone bills of latest 3 months

Proof of income Form 16 for the previous 2 years

Salary slip for the previous 3 months

Latest Bank Statement/Passbook from where you can show a salary/income being credited for the previous 6 months

Other documents

Employment Contract / Appointment Letter in case current employment is less than 1 year old

Passport size photograph of all the applicants / co-applicants to be affixed on the Application Form and signed across

Cheque for processing fee

Self Employed-Proprietorship FirmIndividual KYC of the Proprietor

PAN Card (Borrower and Co-Borrower)

Address Proof ( Utility bill, Passport, Aadhar Card, Driving License)

Ownership proof (Electricity bill in name of company or Individual)

Company KYC

Office Proof ( Shop and Establishment Cert /Gumasta or other registered document)

Office Utility bill in the name of office (Phone or Elec bill)

Other Tax documents

Business Profile & Latest Form 26 AS

Latest 3 Years Financials

ITR Saral Page and Computation of Income -gap should be more than 6 months between 2 year ITR filing

Tax Audit Report (Form 3CB and 3CD) (42 Points)

Last 3 years Balance sheet and Schedules attested by CA

Last 3 years Profit and Loss and Schedules attested by CA

Latest 6 Months or 1 year Bank statement of Current Account

Sanction letters and Statement of Account of existing loans

Contact Details (Mobile no, Landline no, Email ID)

Passport size photograph of all the applicants / co-applicants to be affixed on the Application Form and

signed across


Self Employed-Partnership FirmIndividual KYC of Partners

Company Pan Card

Company Utility bill in the name of office (Phone or Elec bill)

Partnership Deed

PAN Card (All the Partners compulsory)



Other Documents



ITR Saral Page and Computation of Income







Passport size photograph of all the applicants / co-applicants to be affixed on the Application Form

and signed across


Self Employed-Private Limited CompanyIndividual KYC of the Directors on Board

Company Pan Card

Company Utility bill in the name of company (Phone or Elec bill)

Memorandum and Articles of Association of the Company

List of Directors and Shareholders with their individual shareholding certified by a CA / CS

PAN Card of shareholders having minimum 51% required



Board Resolution



ITR Saral Page and Computation of Income


Auditors Report and Annexure to Auditors report

Directors report







and signed across


Self Employed-Professionals

Individual KYC

PAN Card (Borrower and Co-Borrower)



Education qualification certificate

Certificate of practice

ITR of last 3 years and latest 6 Months or 1 year Bank statements

Cash/Income Receipts of a year



and signed across


Property Documents

1.Title Deeds including the previous chain of the property documents

2.Proof of no encumbrances on the property

3.Approved plan if applicable

Qualification/Eligibility criteriaAm I eligible for the loan?

Eligible Property

Self occupied residential property

Self occupied commercial

property

Rented/Let out property

Vacant –Residential & Commercial

property

Warehouse

Non-AgriLand

Property Status

Should be Fully Constructed and Clearly Demarcated

Identifiable and Registered

Land needs to be Non Agricultural land to be allotted by collector

Other property location policies vary in different Banks/NBFCs

Property should not be…

Dilapidated property Load bearing property

General restricted profiles and areas*

Grampanchayat lands (deviation taken if approved by collector) Vacant industrial property(deviation taken if property is used for commercial

purposes) Real estate/speculation/Stock brokers Liquor shops Lawyers Media houses Builders Slums, Chawls, SRA( Slum Rehabilitation Authority) below 10 years old,

community dominated area

**Some profiles are eligible in certain lending institutions

Determination of Loan amount

Type of property Age of the propertyCurrent usage of

the propertyMarket value of the

property

LOAN TO VALUE

• A loan to value (LTV) ratio is a number that describes the size of a loan compared to the value of the property securing the loan. Lenders and others use the ratio to understand how risky a loan is, and it can be used for approving loans or requiring mortgage insurance.

FUNDING AS PER INCOME V/S PROPERTY VALUE

• Eligibility calculated as per income and property value• LTV ratio applicable to either income or property value whichever is

lower

Property Bank NBFC

Self occupied residential property(SORP)

75% 65%

Self occupied commercial property(SOCP)

60% 55%

Rented or let out Residential Property

70% 55%

Rented or let out Commercial Property

60% 50%

Vacant Property Bank specific 45%-55%

Restaurants 65% 55%

Warehouse Bank specific 45%

Balance Transfer

LAP balance transfer is an option that allows you to switch from an expensive loanthat you availed some years back to a lower interest loan.We have helped many customers save huge amounts by helping them switch to lessexpensive loans.The balance transfer option essentially involves foreclosing the existing loan andtaking a new loan for the unpaid principal amount. However, banks may charge pre-payment penalty.

Tenure & Rate of Interest

OverviewExposure

20 Lacs to 10 Cr

Collateral

Mortgage of Loan property

Tenure

Upto 15 years

Rate of Interest

8.75% to 12%*

Processing Fees

0.5% to 1%* of loan amount

Eligibility Calculating Methods

Methods Of Calculating Income Eligibility

• Debt servicing coverage ratio

• Income based program(Cash Profit method) on financials basis(ITR)

• Turnover/Gross Profit method

• Gross Receipts method

• Surrogate programs – not on financials but on banking

• Banking/Average Bank Balance method (ABB)

• Repayment Track (RTR) method

• Liquid income profile

• Low LTV

Partner channelsNBFC

ADITYA BIRLA FINANCE LIMITED

AU FINANCE LIMITEDCAPITAL FIRST LIMITEDCAPRI GLOBAL CAPITAL LIMITED (ALSO CP)

CHOLAMANDLAM INVESTMENT AND FINANCE COMPANY LTDEDELWEISS FINANCE LIMITED

ESSEL FINANCEFINMAX FINANCEFULLERTON INDIA CREDIT COMPANY LIMITED

HERO FIN CORP(ALSO CP)HINDUJA LEYLAND FINANCE LIMITED

INDIA INFOLINE FINANCE LIMITED (IIFL)INDIABULLS HOUSING FINANCE LIMITEDINDOSTAR CAPITAL FINANCE LIMITEDJANALAKSHMI FINANCIAL SERVICES LTD

L&T FINANCE

MAGMA FINCORP LIMITED

ORIX LEASING & FINANCIAL SERVICES INDIA LIMITED(ALSO CP)

PIRAMAL CAPITALPNB HOUSING

RELIANCE CAPITAL

TATA CAPITAL HOUSING FINANCE

Bank

AXIS BANK

DBS BANK

DEUTSCHE BANK

FEDERAL BANK

HDFC BANK LTD

ICICI BANK

IDFC BANK(ALSO CP)

INDUSIND BANK

KOTAK MAHINDRA BANK

RBL BANK

STANDARD CHARTERED BANK

YES BANK

FAQs In LAP, until when is the sanction letter valid?

For 3 months the sanction letter is valid.

What is the collateral required in LAP? Any owned property (residence or commercial)

Will the co-applicant’s salary or income be included in the eligibility? Yes, in case of spouse your salaries can be clubbed for the purpose of calculation of the loan

amount. This can be done either when the property is jointly held with the spouse or the spousestands as a guarantor.

Even parents income can be added.

What is carpet area? Carpet Area is the area enclosed within the walls, actual area to lay the carpet. This area does

not include the thickness of the inner walls. It is the actual useable area of an apartment, office,unit, showroom etc.

What is built up area? Built up Area consists of carpet area, area covered by inner and outer walls and additional areas

mandated by the authority such as flower beds, dry balcony etc.

What is super built up area? Super Built Up Area is the built up area plus proportionate area of common facilities such as the

lobby, lifts, shaft, stairs, etc. Sometimes it may also include the common areas such, swimmingpool, garden, clubhouse, etc. This term is therefore only applicable in the case of multi-dwellingunits.

What is approved plan? The building plan made by the developer which is approved by the Municipal Corporation or the

concerned authority is approved plan.

What is CC and OC? CC means Commencement Certificate. A commencement certificate is issued by the local

authorities to allow the builder to begin construction once all norms have been met. Unless thecommencement certificate is granted, the construction is illegal. It is subsequent to the approvedplan.

OC means Occupation Certificate. This certificate issued by the local municipal body to the builder/developer once the said building is complete in all respects and fit for occupation.

FAQs

What is conveyance deed? Conveyance is the act of transferring ownership rights of the property (plot of land where the

building is built) from the developer / builder / development authority to the society.

What is share certificate? In a society share certificate is issued to its members (flat owners); it is a legal document that

certifies ownership of a specific distinctive number of shares in a society. Share certificate willbear the seal of the society & will be signed by the Chairman, and the Secretary. During LAPShare Certificate is very much important document required for sanctioning your loan.

What is Stamp Duty? It is a duty collected by the state government. Stamp duty is a government tax, which is levied

on all legal property transactions. Stamp duty is, therefore, a tax which is evidence, as it were,of any purchase or sale of a property between two or more parties. It is paid as per the truemarket value as assessed by the Stamp Office. Stamp duty is decided by the respective Stateand hence would vary from state to state. When an agreement is to be franked, it needs to beunsigned and undated.

FAQs

Where is the registration done? The agreement should be registered with the Sub-Registrar of assurances under the provisions of

the Indian Registration Act. Stamp duty is to be paid prior to the Registration.

What is chain of agreements in LAP? In LAP chain Agreements is chain of all the agreement right from its first purchase from the builder

to the present owner. During LAP process we need to submit the chain of agreements to thebanks/NBFC to do technical and valuation of the said property.

What is legal and technical verification? In LAP legal verification is a process where all the agreements & documents related to the

concerned property are given to a lawyer to verify the legal and title of the concerned property. It isdone by panel of qualified lawyers appointed by the Banks/NBFC.

In LAP technical is a process where the valuator assigned by the BANK/NBFC evaluate the cost ofthe property, checks its permissions and the condition of the building. It also checks whether theproperty is mortgagable and free from all legal issues.

FAQs

What is OCR? OCR means Own Contribution Receipt. It is the amount paid by the purchaser to his seller

and a receipt acquired for the same. It is advisable for the purchaser to pay his owncontribution to the builder / seller by cheque and obtain receipts for the same.

What is NOC and why is it important? NOC means No Objection Certificate. It is asked by the lenders from builders/society on their

letter head. In this letter the builder / society mentions that they have noted in their booksthe charge created by them on the said property. All Banks/NBFC have their own formatwhich builders/society need to oblige. To obtain this all the dues & transfer charges of thesociety need to be cleared. It is mandatory to the committee to issue the NOC in theprescribed banks format under Maharashtra Co-operative Society Act, 1960 u/s 79(2)(a).

What is Equitable mortgage? An equitable mortgage is the transfer of an interest in property to a lender as a security for a

loan of money on the condition that this interest will be returned to the owner when theterms of the mortgage have been satisfied or performed. Bank/NBFC give this loan bydeposit of title deeds of the property (interest) with the lender.

FAQs

What is Residential mortgage? In this case property is registered with sub-registrar and charge is created against the property in

Government records.

Can I get LAP by mortgaging property overseas? NO! One cannot get LAP by mortgaging property overseas.

Do I get a refund of processing fees if I do not avail the loan? No, the processing fees are non refundable.

What does “Agreement to sell” mean? The 'Agreement to Sell' in a property transaction is a legal document executed on a stamp paper

that records in writing the understanding between the buyer and the seller and all the details ofthe property such as area, possession date, price etc.In many Indian states, the Agreement to Sell is required to be registered by law. We suggest that inyour own interest you should register the Agreement within four months of the date of theAgreement at the office of the Sub-Registrar appointed by the State Government, under theIndian Registration Act, 1908.

FAQs