Taking a loan to construct commercial property might seem like a complicated process. Read this post to understand 5 of the most important things about such loans.
Dreams require hard work and dedication. With a commercial property tailored as per your needs, one can take a huge step towards their goal. Be it building an office or a clinic; there are now loans available for constructing commercial property to help one get the required funds for the construction. However, as these loans are not as common as home loans or building a residential property, borrowers often have little to no idea about these loans.
Five important things that a borrower should know about these loans are discussed below-
- How can Commercial Property Construction Loan be Used?
A loan for constructing a commercial property can be used for buying a commercial plot as well as building property on it. Borrowers can pick a plot of their choice, and the lender would offer loan to acquire the plot and construct commercial property.
Regional banks, NBFCs, and housing finance companies are more preferred for this type of loan as they understand the local markets better.
- Loan Underwriting
Once a borrower applies for the loan, and it is approved, the lender will begin the underwriting process. In this process, the lender will evaluate the proposed project, construction budget, financial capability of guarantors, local market conditions, and address inherent risks of the loan request.
Once the lender is fully satisfied, they will then issue a commitment letter with detailed information about the loan.
- Expert Counselling
As buying and building a commercial property is a complex process, most borrowers hire an attorney for the same. Nowadays, some of the lenders also offer expert technical and legal counselling to help borrowers pick the right plot for their commercial construction.
Especially if a borrower is taking a loan for the first time, such lenders that offer to counsel are highly recommended.
- Interest Rate and EMI
With the increasing popularity of loans for building commercial property, the interest rates of such loans have fallen considerably in the past few years, and they are now available at attractive rates. Before picking a lender, a borrower should compulsorily compare the lenders and along with the interest rate compare the terms and conditions of the loan to make the right decision.
Just like all the different types of loans, a loan for commercial property can also be repaid easily through monthly instalments.
- The closing of the Loan
Once the lender is done with the underwriting process and the borrower receives the approval letter, the closing process of the loan begins. As the closing of a construction loan for commercial property usually involves a lot of procedural nuances and documentation, the process is typically handled by the attorneys of the lender and the borrower.
Lenders also offer a checklist for the borrowers to help them know the closing process in detail and begin the funding process.
Loans for building commercial property can easily become difficult and confusing to secure. Understanding how the loan works and how lenders evaluate the project can make it easier for the borrower to demystify the process. Remember the points mentioned above, and you’ll at least have a detailed idea about how such loans work.