Loan Against Property: Rates, LTV, Costs and the Real Risk
You need Rs 60 lakh. A personal loan prices north of 12% and caps out around Rs 40 lakh. A business loan wants collateral anyway. Sitting in front of you is a flat worth Rs 1.4 crore with no loan on it. A loan against property turns that flat into the cheapest large sum you can raise without selling, and it does it by putting the roof over your head on the line. That trade is the whole product: the paperwork is the easy part, the consequence of missing twelve EMIs is not.
Key takeaways
- A LAP prices roughly 1.5 to 4 percentage points above a home loan. With home loan floors around 7.10% to 7.50% in September 2026, bank LAP offers sit in an 8.95% to 11.50% band and NBFCs run to 15%.
- You get 50% to 70% of market value — a few NBFCs stretch to 75% — against 75% to 90% on a home loan, and the lender's valuer decides the value, not the broker.
- Tenure is shorter. Ten to fifteen years is standard, twenty at some housing finance companies, against thirty on a home loan.
- Tax relief is conditional. No Section 80C on the principal at all, and interest is deductible only where the money goes into a house or a business.
- Enforcement is fast. Under the SARFAESI Act, 2002 a secured lender issues a 60-day notice and can then take possession without going to court first.
- Budget 1% to 3% of the loan in one-time costs — processing fee, valuation, mortgage stamp duty and registry charges.
What a loan against property actually is
A secured loan where you mortgage a property you own and spend the money on anything. The property stays yours, you keep living in it or letting it out, and the lender holds a registered charge until the loan closes.
Two forms exist. A term LAP disburses a lump sum repaid in EMIs. An overdraft against property gives you a limit you draw and repay at will, with interest only on what is outstanding — useful for lumpy working capital, dearer by 25 to 75 basis points, and dangerous for anyone who treats a limit as income.
The usual reasons: business expansion, consolidating unsecured debt, a medical event, education abroad, bridging the gap while an old property sells. The bad reasons are a wedding and a holiday, and lenders fund those too.
What it costs against everything else
The repo rate has stood at 5.25% since the August 2026 review, and retail secured lending is priced off it with a spread. Where your LAP lands inside these bands is decided by your credit score, your income documentation, the property type, and whether the lender is a bank or an NBFC.
| Option | Typical rate band | What you can raise | Tenure |
|---|---|---|---|
| Home loan (to buy) | 7.10% to 7.50% at the floor | 75% to 90% of value | Up to 30 years |
| Top-up on an existing home loan | About 0.25% to 1% above your home loan rate | Limited by the original LTV cap | Residual home loan tenure |
| LAP from a bank | About 8.95% to 11.50% | 50% to 70% of value | 10 to 15 years |
| LAP from an NBFC or HFC | About 9.5% to 15% | 50% to 75% | Up to 20 years, 25 at a few |
| Gold loan | About 9% to 18% | Up to 75% of gold value | Usually under 3 years |
| Personal loan | About 10.5% to 24% | Rs 40 lakh at the outside | 1 to 7 years |
Published rate cards contradict each other badly. Large public sector banks open their LAP cards near 8.95%, private banks run to about 11.50%, NBFCs price the risky end to 15%, and aggregator pages still show 18%. Some lender pages still compute the spread off a 6.50% repo rate. Treat the table as the shape of the market; get three written offers. If the flat already carries a home loan, price a top-up first — the side-by-side comparison runs that arithmetic.
How much you actually get
Two limits apply and you get the lower: the loan-to-value cap, and what your income can service, with total EMIs usually capped at 50% to 60% of income.
| Property offered | Usual LTV | Notes |
|---|---|---|
| Self-occupied residential | 60% to 70% | Preferred security, best pricing; a few NBFCs go to 75% |
| Let-out residential | 60% to 65% | Rent may be counted as income at 60% to 75% |
| Commercial shop or office | 50% to 60% | Rate 25 to 100 basis points higher |
| Industrial unit | 40% to 50% | Fewer lenders, slower valuation |
| Residential plot or land | 40% to 50% | Many lenders decline outright |
Valuation is where expectations break. Lenders run their own technical valuation, and in some states take the lower of that and the circle rate benchmark. A flat you would list at Rs 1.4 crore may be valued at Rs 1.2 crore, and 65% of that is Rs 78 lakh, not the Rs 91 lakh you had in mind. Get the valuation in writing before paying a processing fee.
Who qualifies
Salaried
Age 21 to 60 at maturity, two years of work experience with six months in the current job, three years of ITRs or Form 16, six months of salary statements, and a credit score above 700 — 750 for the best pricing. Every co-owner signs as a co-borrower.
Self-employed
Age 25 to 65 at maturity, three years of business vintage, two to three years of ITRs with computation, audited financials where applicable, GST returns, and twelve months of current account statements. Where the ITR understates what the business earns, some lenders underwrite on banking turnover, usually 50 to 150 basis points above the salaried card.
Which properties lenders will and will not take
A clean, freehold, approved property with clear title. The refusals are more instructive: unauthorised colonies, gram panchayat land, a flat with no occupancy certificate, a building past 30 to 40 years with no redevelopment plan, agricultural land in almost every case, anything under litigation or attachment. A share-certificate flat in a society that has not completed conveyance is a common decline in Mumbai and Pune.
Expect to produce the full chain of registered deeds, the latest tax receipt, the approved building plan and occupancy certificate, the society no-objection, and an encumbrance certificate covering the lender's search period.
The costs beyond the rate
- Processing fee — 0.35% to 2% plus GST, commonly 1% at banks and up to 3% at NBFCs. On Rs 60 lakh that is Rs 21,000 to Rs 1.2 lakh, and it is negotiable.
- Legal and technical valuation — Rs 5,000 to Rs 15,000, sometimes bundled into the fee above.
- Stamp duty on the mortgage — 0.1% to 0.5% of the loan amount, state by state, with a cap in several states.
- CERSAI registration and documentation — a few hundred to a couple of thousand.
- Prepayment. Under the RBI's pre-payment directions, which apply to loans sanctioned or renewed from 1 January 2026, floating-rate loans to individuals carry no foreclosure charge, and the protection reaches micro and small enterprises within the limits specified. Fixed-rate LAP can still carry 2% to 4%, so check which rate type your sanction letter records.
Expect 15 to 30 days to disbursement — slower than a personal loan, because the property checks are the ones a home loan lender runs.
The honest part
A LAP prices above a home loan for a reason, and it is not generosity on home loans. A home loan borrower is buying the asset with his own down payment sitting in it. A LAP borrower is extracting cash from an asset he owns, usually because other funding was unavailable or dearer. The lender prices that difference.
Then enforcement. The SARFAESI Act, 2002 lets a secured creditor issue a demand notice once an account turns non-performing and, if the dues are not cleared within 60 days, take possession and sell the property administratively, without a court decree. You can appeal to the Debts Recovery Tribunal, but you are the one appealing. Home loan defaults follow the same route with one difference: nobody was living in the flat before the home loan existed.
Three tests. Does the money produce a return or clear a dearer debt, rather than fund consumption? Can you service the EMI from income that does not depend on what you are borrowing for? If the worst happens, is there a second asset that clears the loan? If any answer is no, borrow less — and do not count on a payment holiday, as our page on what a moratorium does explains. If you hold spare cash and a home loan too, the prepayment arithmetic comes first.
FAQ
How much loan can I get against my property?
Between 50% and 70% of the lender's own valuation for a residential property, less for commercial and land, capped further by a total EMI-to-income ratio of roughly 50% to 60%. On a flat valued at Rs 1.2 crore with no other loans, Rs 70 lakh to Rs 80 lakh is realistic.
Can I take a LAP on a property that already has a home loan?
Usually not as a second mortgage from a different lender. Take a top-up from the existing lender, or move the loan to a new lender who funds the outstanding plus an extra amount within the LTV cap. The top-up is normally cheaper.
Is loan against property interest tax deductible?
Only conditionally. Interest qualifies under Section 24(b) if the money buys, builds or repairs a house, subject to the Rs 2 lakh self-occupied limit, and as a business expense if it funds a business. A wedding, a car or a holiday gets nothing, and LAP principal does not qualify under Section 80C, which covers only a loan taken to buy or construct a house.
What happens if I default on a loan against property?
The account turns non-performing after 90 days of arrears, the lender issues a SARFAESI notice giving 60 days to clear the dues, and can then take possession and auction the property. Talk to the lender at the first missed EMI, not the fourth.
Can I get a LAP on a property jointly owned with my brother?
Yes, but every co-owner must join as a co-borrower or guarantor and sign the mortgage. A co-owner who will not sign ends the application, which is why undivided family property is a frequent decline. Who signs also shapes the tax position, as our note on jointly owned property sets out.
Before you apply
Get the property papers in order first. The chain of title, the occupancy certificate and the tax receipts decide whether the file moves at all, which is why our title and legal check is worth running before you apply. For a view on what your property would value at, tell us the address.
