Owning a commercial property in Mohali is no doubt a great achievement as in case you face a sudden requirement of money; then this commercial property will come in handy as you can always liquidate the same. However, in order to become the owner of a commercial property you will have to invest quite a huge sum of money in it, which is most of the times not possible without taking a loan.
Commercial properties are usually of two types:
- Office space
- Retail outlet
These properties are further classified as Under-construction and Ready to occupy.
Banks when approving loans for commercial property are usually very critical, especially if it is an under-construction project. In fact, there are a number of banks and financial institutions that do not fund commercial properties but those who do it have certain different rules and regulations in place. So, before you go ahead and finalize on any commercial property, make sure that you have checked with the loan adviser to know about the funding option.
Understanding the difference between residential and commercial property funding:
Even though the financial documents required by the banks and financial institutions to determine the loan eligibility of the debtor is same as that required for residential property, there are a number of differences that are listed below:
For residential funding, the lesser loan to value ratio or LTV ranges between 75 to 90%. On the other hand the LTV ratio percentage is restricted to 55% for commercial purchases which means that the debtors need to make more self-contribution.
In case of residential properties, the processing fee for residential purchases are fixed at 10,000 and in some schemes even lesser fee is charged which can be as low as zero. On the other hand, for commercial property, the standard is 1% of the loan amount. At times it can be reduced to a minimum of 0.5%, but that usually depends on the lender.
The rate of interest for commercial property loan can at be 1 to 2% higher than the residential ones and it can go to even 4 to 5% as well.
When you choose to get a commercial property loan, then the financial institution will carry out a thorough background verification of the builder, especially if the property is under-construction. The financial institution or the bank will look at the past track record of the builder to find out if he has been providing on time delivery.
When approving a commercial property loan, the lender may want to fund only a certain area square foot. In retail outlets, there are small spaces known as vanilla shops where the bank ATMs are made and these can have less than 100 sq. ft. of area. It is therefore important to find out if the lender is ready to invest in such a small area as every lender has different policies in place on this matter.
These are some of the important factors that you should consider when opting for a commercial property loan for a retail space in Mohali. Remember, once you become the proud owner of a commercial property you can certainly reap a large amount of profits which is not possible with a residential property.