A Beginner’s Guide to Commercial Property Loans: What You Need to Know

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It’s not uncommon for people to feel overwhelmed when applying for loans to buy commercial properties. Financing for an office or commercial unit may seem more complicated in comparison. Commercial property real estate (CRE) transactions may be for an office or retail space such as a store or shop. These may be under construction or are ready to be occupied. But irrespective of whether the commercial property is under construction or ready to occupy, you should be aware of the details. Let’s understand those in brief.

Eligibility guidelines and important information

Fees and charges

The rate of any commercial property loan typically comes with processing fees of 1.5% of the total loan amount. However, some banks may also offer a minimum fee of 0.5%.

LTV (loan to value)

The loan-to-value (LTV) ratio is the percentage that you can get from the loan amount based on the total value of your property. For instance, in the case of commercial properties, the LTV maybe 50% to 55%. This means you can only get 50% of the commercial asset’s value as your loan amount! In such cases, you will need to make a much larger down payment.

Developer profile

The developer’s profile and reputation matter, especially when the commercial property is in the process of construction.
Commercial properties are developed at a faster pace than residential units, but the number of tenants is lower.
Financial institutions check the builder’s delivery schedule prior to approving the loan amount.

Interest rate

Commercial property interest rates are 4 to 5 per cent higher than housing loans, depending on the borrower’s credit history.

Technical specifications

Commercial buildings must comply with all statutory requirements, such as fire safety, civic amenities, lifts, shafts, escalators, staircases, emergency exits, etc.
Banks have a technical analysis team to check every detail before approving the loan application.
Commercial property developers must obtain approval from all departments of government and municipal bodies, in addition to submitting legally approved development plans.

Loan duration

On average, commercial property loans have tenures of 10 to 15 years. This means that you will have to pay a higher EMI each month.

Loan disbursements

A bank may decide to finance the purchase of a commercial property only partially if it anticipates a loan default down the line. Banks may also take this step if they foresee structural risks resulting from non-compliance.

Commercial property valuation

The amount of the final loan is based on the commercial property price. The commercial property price quoted by independent agents to the bank is considered the lowest commercial property price.

Property age

Old buildings are challenging to finance, not only because of the risks involved but also because there are no approved plans for development or other mandatory elements such as fire exits.


Most financial institutions will approve the loan on the basis of minimum square feet. In some cases, they may even be less than 100 square feet. Lenders have minimum requirements, meaning they may only approve funding for spaces over 300 square feet or 500 square feet.


One of the most profitable investments you can make is commercial real estate (CRE). These income-generating properties offer many benefits over residential investments. Not only can they help you build wealth, but they can also help you generate monthly cash flow.
You can choose a commercial property loan if you meet the above criteria. HomeLoans4U, a trusted brand for loans, could be your right choice when it comes to any type of loan for the lowest interest rates

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