Loan Against Property: How Much Can You Actually Raise?

Almost every conversation about a loan against property starts the same way: "My property is worth four crore, so I should get around three." It is a reasonable assumption and it is almost always wrong. The gap between what an owner expects and what a bank sanctions is the single biggest cause of disappointment in this product — and it is entirely avoidable, because the arithmetic is knowable before you apply.

Three separate tests decide how much you can raise. Your property has to be valued, a percentage of that value is what the lender will lend against, and your income has to be able to service the resulting EMI. Each produces a number. The one that governs is the lowest — not the average, and certainly not the one you like best.

Test one: what the bank thinks your property is worth

The number that matters is not the circle rate, not what your neighbour sold for, and not what a broker told you last year. It is the figure produced by the lender's own empanelled valuer, and it comes in lower than the market view more often than not.

Valuers are conservative by instinct, because their report is what the bank falls back on if the loan goes wrong. They tend to discount for anything that would make the property slow to sell: an unusual layout, a narrow approach road, a plot shape that limits redevelopment, or a location where comparable transactions are thin. A property that is genuinely desirable to live in can still be valued cautiously if it would be hard to dispose of quickly.

Two things surprise owners most. First, unapproved or unregularised construction is usually excluded from the valuation altogether — if a floor was added without sanction, the bank may simply not count it. Second, for commercial and industrial property the valuer often leans on what the property earns rather than what similar units sold for, so a vacant or under-let building values lower than the owner expects.

Test two: what proportion of that value they will lend

No lender funds the full assessed value. They lend a proportion of it, keeping the rest as their cushion, and that proportion varies more than most borrowers realise.

Residential property that you occupy attracts the most generous treatment. Commercial property is funded at a lower proportion. Industrial property, land without construction, and specialised buildings that only one type of buyer would want are funded lower still — and some lenders decline them outright. This is bank credit policy rather than regulation, which is precisely why the same property can produce materially different offers from two lenders in the same week.

This is also the point at which choosing the right lender stops being a matter of interest rate. A bank comfortable with your asset class may lend a meaningfully higher proportion than one that is not, and that difference usually dwarfs any saving from shopping on rate alone.

Test three: whether you can service the EMI

This is the test owners forget, and it is the one that most often sets the final number. Security is what the lender falls back on; repayment capacity is what they actually underwrite against. No bank wants to recover its money by selling your property — that is a slow, expensive, litigious last resort.

So the lender adds up your existing EMIs, adds the proposed one, and checks the total against your documented income. If that ratio is uncomfortable, the loan is cut back regardless of how much the property is worth. We regularly see files where the property comfortably supports two crore and the income supports one — and one is what gets sanctioned.

For self-employed borrowers this is where presentation matters most. The income assessed is the income you have filed, consistently, across two to three years. Cash that never entered the books does not exist for this purpose, however real it is.

What quietly reduces the number

Several things shrink the figure without the owner ever being told why. An incomplete chain of title, where one link in the ownership history is missing or unregistered, is the most common — and the most fatal. A tenanted property with a long lease and a protected tenant can be treated as harder to realise. An ageing building with limited remaining structural life is funded over a shorter tenure, which raises the EMI and therefore lowers the eligible loan. Joint ownership where one owner will not sign stops the file entirely.

An existing charge on the property that the owner has forgotten about — an old business loan, a guarantee given years ago — will surface in the legal search whether or not it is disclosed. Disclosing it upfront costs nothing. Having it discovered costs you credibility on the whole file.

What legitimately increases it

Adding a co-applicant with documented income raises the repayment-capacity ceiling, and is often the fastest way to close a gap. A longer tenure lowers the EMI and therefore lifts eligibility, though it increases total interest paid — a trade worth making deliberately rather than by accident.

Where your requirement varies month to month, an overdraft against property is worth considering instead of a term loan. You draw what you need and pay interest only on what is drawn, which suits a business with a seasonal or lumpy cycle far better than a fixed EMI.

And regularising unapproved construction before you apply, where that is possible, can bring a meaningful part of the property back into the valuation.

A worked example

Take an owner who believes their commercial property is worth four crore. The bank's valuer assesses it at three and a half. The lender's policy funds a proportion of that for commercial property, producing a figure of around two crore. But the borrower's filed income, after existing EMIs, supports repayment on roughly one and a quarter crore. The sanction is one and a quarter crore — governed by income, not by the property at all.

The figures here are illustrative and the proportions differ by lender and by property, but the shape of the calculation is what matters: three tests, and the lowest one wins.

Before you apply

Get your title documents in order first — chain of ownership, approved plan, occupancy certificate where applicable, current property tax receipts. Most files that collapse, collapse here, and they collapse after you have already paid for valuation and legal.

Then work out the realistic number before you commit to whatever you are raising the money for. Signing an agreement on the strength of a loan that turns out to be a third smaller is a genuinely bad position to be in.

Finally, be honest with yourself about what the money is for. A loan against property is cheaper than unsecured borrowing precisely because your property is at stake. It should fund something that earns or saves more than it costs. It is the wrong instrument for covering a shortfall you have no plan to close.

If you want the realistic figure for your property before you spend anything on valuation or legal fees, that is a conversation we are happy to have. It usually takes half an hour, and it is free.