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Loan Against Property

An ideal way to make optimum use of an idle property is to take a loan against the property. With the increasing costs every day, be it the cost of living or the medical expenses or the cost of education, one might be in a financial emergency at any point in time. A loan against property is the best way to meet the financial needs of an individual.
 

Considering such situations, IDBI Bank, a renowned public sector undertaking provides loan against property schemes at affordable interest rates. One can take a loan against property for the following purposes:
 

  • Buying a house
  • Making an extension or improving existing property
  • Business expansion
  • Child’s higher education
  • Marriage expenses
  • Medical treatment
  • Other personal expenses

 The following are the types of loan against property which the bank provides:
 

  • Loan against property
  • Loan against property (overdraft)
  • Loan against property (interest saver)
  • Loan against property (rent receivables)

Loan Liability and Interest Rates for Loan Against Property

Loan Against Property (LAP)/ Loan Against Rent Receivable (LARR)

10.95% (MCLR + 1.65%) for PSL

11.45% (MCLR + 2.15%) for non-PSL

Loan Against Property – Overdraft (LAP-OD)/ Loan Against Property – Interest Saver (LAP-IS)

11.20% (MCLR + 1.90%) for PSL

11.70% (MCLR + 2.40%) for non-PSL

Loan Against Property and its variants – Based on Turnover

12.20% (MCLR + 2.90%) for PSL

12.45% (MCLR + 3.15%) for non-PSL

Salaried Individuals and Self-Employed Professionals who have availed a Loan Against Property from USA (only in case of a full disbursed loan)

12.49%


The interest rates on property loan based on 1 Year MCLR is currently 9.30%
 

The borrower of a property loan from IDBI Bank has to repay the entire loan amount within the loan tenure. In a case, where the borrower fails to repay his loan, then the bank has the right to recover the money by putting his mortgaged property for auction.

Other Charges Applicable

Foreclosure charges

 

Floating rate

 

For individuals

Nil pre-payment/ foreclosure charges

For non-individuals (either as an applicant or as a co-applicant)

  1. Cases sanctioned on or after January 28, 2015 – the foreclosure charge will be 2% of the outstanding loan amount plus applicable tax
  2. Cases sanctioned before January 28, 2015 – the foreclosure charge will be that which is mentioned in the sanction letter and loan terms and conditions

Fixed rate

 

For own funds

The bank reserves the right to request for any document it considered necessary

For own funds, (within 6 months from final disbursement)

  1. Cases sanctioned on or after January 28, 2015 – the foreclosure charge will be 2% of the outstanding loan amount plus applicable tax
  2. Cases sanctioned before January 28, 2015 – the foreclosure charge will be that which is mentioned in the sanction letter and loan terms and conditions

For own funds (post 6 months from final disbursement)

Nil pre-payment/ foreclosure charges

For balance transfer

  1. Cases sanctioned on or after January 28, 2015 – the foreclosure charge will be 2% of the outstanding loan amount plus applicable tax
  2. Cases sanctioned before January 28, 2015 – the foreclosure charge will be that which is mentioned in the sanction letter and loan terms and conditions

Pre-closure time period

 

Time for retrieval of original documents after realization of closure payment

15 working days

Penal interest charges

5% per annum for the overdue amount and overdue period

PDC/ ECS swapping

Rs. 575

Default in payment of EMI on property loan, interest or principal

 

For reasons within the control of the borrower such as:

  • Insufficient funds
  • Arrangement exceeded
  • Refer to drawer
  • Not arranged for
  • Full cover not received
  • Effects are not cleared

Rs. 300

Copy of property documents

Rs. 225

DD/ PO re-issuance

Rs. 115

Duplicate statement charge

Rs. 115

Copy of credit information obtained from CIBIL

Rs. 50

Duplicate certificate/ interest paid certificate

Rs. 150

Non-collection of original documents after 30 days from the date of loan closure

Rs. 1,000

Part payment

 

Minimum amount

Rs. 25,000

Number of times

Not more than 1 pre-payment in a month

Processing and administrative fees

 

Loan Against Property (LAP)

 

Cases which are sourced through DSA and DST

  • 1% of the loan amount together with applicable taxes
  • Under this, any divergence or variation in the fee structure can be done only by the Regional Head and above (DGM and above), subject to Rs. 10,000 or 0.50% of the loan amount plus applicable taxes, whichever is lower

Loan Against Property (LAP)

 

Cases which are sourced by branches and RACs

  • 0.50% of the loan amount together with applicable taxes
  • Under this, any divergence or variation in the fee structure can be done only by the Regional Head and above (DGM and above), subject to Rs. 10,000 or 0.25% of the loan amount plus applicable taxes, whichever is lower

Loan Against Property – Overdraft (LAP-OD)

  • A processing fee of 1% of the loan amount together with applicable taxes
  • 0.50% of the loan amount together with applicable taxes for cases which are sourced by branches and RACs
  • Upon renewal, a processing fee of Rs. 5,000 plus applicable service tax is collected upfront At login, an amount of Rs. 10,000 or 0.50% of the loan amount plus applicable taxes, whichever is lower, is collected and the remainder is deducted from the disbursement amount upfront

Loan Against Property – Interest Saver (LAP-IS)

  • Up to 1% of the loan amount together with applicable taxes (subject to a minimum amount of Rs. 10,000 plus taxes)
  • 0.50% of the loan amount together with applicable taxes for cases which are sourced by branches and RACs
  • At login, an amount of Rs. 10,000 or 0.50% of the loan amount, whichever is lower, is collected and the remainder is deducted from the disbursement amount upfront

Loan Against Rent Receivables (LARR)

  • At login, a non-refundable processing fee of 1% of the loan amount is collected (subject to a minimum of Rs. 10,000 plus applicable taxes)

Loan Against Property – Based on Turnover

  • 1% of the loan amount together with applicable taxes
  • The Regional Head (Assets) and above have the authority to make a variation in the charges, subject to a minimum of 0.50% of the loan amount plus applicable taxes

Documentation Needed

Different categories of customers require a different set of documents to be submitted.
 

Salaried:
 

Salaried individuals need to furnish the following documents:
 

  • Documents related to property
  • Identity and address proof
  • Form 16/ income tax returns
  • Last 3 months salary slips
  • Last 6 months banks statements
  • Application form with recent photograph
  • A cheque for processing fee

Self-Employed Professionals:
 

Self-employed professionals need to furnish the following documents:
 

  • Title deed of the property
  • Identity and address proof
  • Certificates of educational qualifications
  • Proof of business existence
  • Income tax return for 3 years
  • Previous 6 months banks statements
  • Previous 3 years Profit & Loss and Balance Sheet
  • Processing fee cheque
  • Passport-sized photographs

Self-Employed Non-Professionals:
 

Self-employed non-professionals need to furnish the following documents:
 

  • Proof of identity and address
  • Proof of business continuation
  • Income tax return for 3 years
  • Previous 6 months banks statements
  • Previous 3 years Profit & Loss and Balance Sheet
  • Proof of Business Existence
  • Processing fee cheque
  • Passport-sized photographs

Other Features

Loan Against Property:
 

Loan Term


The loan term is up to 15 years which means one has to repay the loan within a maximum period of 15 years.
 

Loan Amount
 

The loan amount that the bank provides under this is up to Rs. 10 crores. The bank also provides loans above Rs. 10 crores, however, the same depends on the merits of the individual case and on the bank’s discretion.


Maximum Funding Amount

The structure of the funding is as follows:
 

  • For a residential self-occupied property, the maximum funding will be 65% of market value of the property
  • For a residential property which has been leased out, the maximum funding will be 55% of market value of the property
  • For a commercial or industrial property, the maximum funding will be 50% of market value of the property

Another important factor which determines the extent of funding is the repayment capacity of the individual as assessed by IDBI Bank. The bank provides more funds to its existing customers.


Processing Fee
 

The bank charges a nominal amount of processing fee of 1% of the loan amount.


Security
 

An equitable mortgage for which the bank has given the loan to a customer as the primary security. Depending on the case, the bank may require liquid collaterals in the form of a guarantee or hypothecation.


Loan Against Property (Overdraft)
 

This is basically given to the self-employed class to meet their working capital requirements. The main purpose is to provide finance to small and medium business, merchants and service providers.


Loan Term
 

This loan is usually for a period of one year and the same can be renewed on demand. However, the bank has the discretion and has the right not to renew the same depending on certain factors like unacceptable repayment track record, etc.


Processing Fee
 

The processing fee is 1% of the loan amount.


Loan Against Property (Interest Saver)
 

Loan against property with interest saver is a unique combination of loan account with a current account which one can use like a normal account to deposit and withdraw cash as per his/ her requirement. Most importantly, one can save on the interest component as the borrower needs to pay interest only on the end of day outstanding balance in the current account. One is given a cheque book and an ATM card for smooth operation of the account.


This loan is usually given for:
 

  • Buying of house
  • For making an extension or for improving the existing property
  • For any expansion of business
  • For children’s higher education
  • For family marriage
  • For any urgent medical treatment
  • For any other personal requirement

Loan Term
 

15 years is the loan term.


The maximum loan amount, security and documentations are same as above (as in the case of a loan against property).


Processing Fee
 

The processing fee is charged as 1% of the loan amount.


Loan Against Property (Rent Receivables)
 

The rent which is received from the mortgaged property is utilized for financing. Properties which are owned by self and are given on rent, one can get finance on that rent as well.


The purposes are:
 

  • For children’s higher education
  • For family marriage
  • For fresh projects
  • Buying of house
  • Existing loan repayment
  • Construction, repair, renovation of residential properties or commercial shops
  • For any commercial trade or business activity


Eligibility
 

Owners of property in the following categories who have rented or leased their properties under registered lease deed or leave and license agreement to public sector undertakings or government or state government or semi-government, banks, financial institutions, renowned corporate houses, MNCs, professionals, HNIs, salaried people, firms, etc.


Properties situated in the following areas are eligible for a loan against property:
 

  • Metro
  • Urban area
  • Semi-urban area
  • Rural area

The loan amount is same as that of a loan against property.


Loan Term
 

The loan term is a maximum of 120 monthly installments or the remaining lease term, whichever is lesser.


Processing Fee
 

The processing fee is charged as 1% of the loan amount.


Maximum Funding Amount
 

A maximum of 85% of the market value of the property is funded.


Assessment of Loan Amount
 

The future rentals will be taken into consideration in calculating the percentage of the loan eligibility for the period of the lease which is not expired.
 

Period of Lease

% of Loan of Future Rent Receivables

Till 3 years

85

3 years to 5 years

75

5 years to 7 years

65

7 years to 10 years

55


Security
 

An equitable mortgage is needed as the primary security. However, the same is not possible mortgage of other property whose market value is not less than 150% of the proposed loan can be given as security.


Depending on each case, the bank will ask for liquid collaterals in the form of a guarantee or hypothecation and assignment.

Why should one opt for IDBI Bank Loan Against Property Scheme?

An IDBI Bank property loan makes funds available to a person in need of finance. A loan against property in IDBI Bank offers the following advantages:
 

  • High quality of service
  • Various options in the market starting from residential, commercial as well as industrial properties
  • No hidden charges
  • Complete disclosure
  • Hassle free procedure

Apply Loan Against Property from IDBI Bank

Apply online is a 5-stepped process in less than 2 minutes at our Paisabazaar website. Follow the below steps and get yourself a loan against property from IDBI bank:
 

  • Visit the Paisabazaar website and select ‘Loan Against Property’ option
  • Log in to the page with your personal details and loan requirements
  • Select IDBI loan against property scheme
  • Submit the scanned copies of all the required documents
  • Click ‘Apply’ and relax

One can visit the nearest IDBI Bank branch and speak to the branch personnel.

Frequently Asked Questions (FAQs)

Q. How should a loan against property be repaid?
 

A. A loan against property can be repaid in the form of Equated Monthly Instalments (EMIs). The EMI on property loan comprises of both the principal and the interest. The repayment must begin from the very next month in which the full loan disbursement has been done.
 

Q. How is the rate of interest calculated on a loan against property?
 

A. The interest on a loan against property is calculated on the daily reducing balance. This way, the equated monthly instalment works out to be much lower as compared to interest calculated on the annual reducing balance.


Q. Who all can be a co-applicant in a loan against property from IDBI Bank?
 

A. The borrower of a loan against property can include his/ her spouse as a co-applicant. The income of the spouse helps to secure a higher loan amount. All co-owners of the mortgaged property mandatorily have to be co-applicants in a property loan from IDBI Bank.


Q. What is the tenure of an IDBI Bank loan against property?


A. IDBI Bank offers a maximum repayment period of 15 years for a loan against property. The repayment cannot ordinarily extend beyond the retirement age (for salaried individuals) or on turning 60, whichever is earlier.


Q. What is the collateral required for loan against property from IDBI Bank?


A. The primary security for a loan against property is the first mortgage on the property to be financed (equitable mortgage by a memorandum of entry) by depositing the title deeds of the property. The collateral security can be in the form of assignment of the insurance policy or any other assignable financial instruments. An important point to remember is that the title of the property should be clear, marketable and free from any encumbrance. There should be no existing mortgage, loan or litigation on the property which can affect the title of the property.


Q. Does the mortgaged property have to be insured?


A. The property is required to be properly insured for fire and other relevant hazards during the tenure of the loan, as per the requirements of IDBI Bank. The borrower has to provide evidence of the same every year to the bank.