Can We Attach Rent From a Commercial Property to Loan?

I learnt about loan against rent receivables just some time back. My sister told me about it because she knew I was going to lease my property on a commercial basis. She told me that a loan provided by banks with the owner's potential rental income serving as collateral. Anyone who possesses a property that has been rented out on a commercial basis is eligible to apply for this loan, though banks may have additional terms and conditions that would specify which customers would actually be eligible for applying for the loan.

Loan against rent agreement

Loan against Rent Receivables is a loan that can be used in place of a Personal Loan for expenditures related to education, marriage, or even aiding in a business endeavour, as well as for taking on new projects, repairs, and renovations. The loan sum that has been approved can be used in almost any way.

Eligibility for availing a loan against rent receivables

The interested party must be the owner of a legally acceptable property, which is the first and most important factor taken into account when contemplating such a loan. Additionally, one or more tenants should be rented out on the contested land. In addition, the subsequent requirements specify the fundamental criteria for obtaining such a loan.

• The property should already be rented out and generating income.

• A plan that has been approved by the local government officials is used to build property.

• The agreement between the owner and the tenant to rent or lease the property in question has been verified (s)

• According to the bank's criteria, both the owner and the tenant(s) are creditworthy.

Other than the aforementioned fundamental requirements, additional information may be added to the eligibility requirements based on individual banks.

So, if you’re wondering can we attach rent from a commercial property to loan, let me tell you that you certainly can.

Documentation Required for loan against rent receivables

Loans against receivables are security-based loans, so they call for all legal documentation proving the owner's, renters', and the property's legitimacy. A list of typical documents that banks might request is provided below:

• Loan application form

• Photograph

• Identity proof

• Residence proof

• Educational qualifications certificate, latest 3 months’ salary slip and/or proof of business existence

• Form 16/ITR or latest 3 years’ Income Tax returns or business profile

• Latest 6 months’ bank statement or last 3 years’ profit/loss and balance sheet

• Processing fee cheque

• Property related documents

• Title of ownership of property

• Approved sanction/building plan

Details about loan against rent receivables

Depending on the bank, the credit could be given for a period of time as long as 10-15 years. The permitted tenure would also depend on the client's financial standing.

The highest loan amount is set based on the property's market value. Most banks think about approving a loan amount that is between 70 and 90% of the property's market worth.

The proportion of the loan repayment amount to the rental amount will be smaller the longer the lease or rental term is in the agreement. This is all you should be aware about loan against rent receivables.