How to get a loan to purchase a commercial property

Hand giving key on a city background

Commercial property loans are all the buzz these days. Though there are lenders who are keen to offer funding to buy you a house, the same cannot be said about commercial property loans. Loan for purchase of commercial property is hard to come by. This is especially in cases where you are an investor.

Getting a home loan these days is not as difficult as it once used to be. But getting a loan for you to afford a workspace for your start-up venture might not be as easy a process as home loans. Rather, the masses are unaware of the process to get a commercial property loan.

A commercial property purchase bifurcates in two main types:

  1. Office space
  1. Retail outlet

These bifurcations have their own subsections like (a) ready to occupy and (b) under construction.

Lenders are often sceptical on financing commercial properties, especially the ones which are still under construction. However, a lender would feel far more comfortable financing your loan if you are buying the property to run your own business. Several lenders only fund the commercial properties which are ready to occupy. They intentionally and actively avoid the ones which are still under construction. So, you as an investor need to check with your loan advisor to weigh the loan options and the criteria for it at hand.

Considering the apprehension of lenders, here is how you can go about getting your commercial property loan:

  • Self-funding

For a residential funding, the lender pitches in anything between 75-90% of the amount. However, in case of a commercial purchase, it is restricted to a mere 55%. It means that you as a borrower would have to put in a considerable amount of the total amount.

  1. A higher ROI

The rate of interest or ROI is a crucial factor while borrowing. It is, generally, 1-2% higher than residential loans. In cases where the documents you submit have a lesser strength and some surrogate product is offered, then you can expect the ROI to go as high as 4-5%. Surrogate, in this sense, means to offer some other loan track or healthy bank balance, etc.

  • Processing fee

The processing fees in residential purchases are nominal. A fixed fee of Rs 10,000/-. In some lucky cases, certain schemes may offer borrowers zero processing fees. That, however, is not the case with commercial purchases. A fixed 1% of the loan amount is charged as the processing fee. If the lender likes your profile, it may be reduced to a minimum of 0.5%.   

  • Loan tenure:

Home loan tenures could be as high as 30 years. Commercial purchases allow only a 10-year tenure. Hence, you need to pay those high EMIs regularly.

These are just a few of the things you need to keep in mind before you think of opting for a commercial purchase. Loan for purchase of commercial property is something that needs ample amount of planning. You need to be vigilant and ready to face what comes your way. However, let not the risks dishearten your decision of opting for one, as it cannot be denied that the return on investment from a commercial property has always been on a higher side.


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