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Thursday, 10 May 2018

Making Availing a Loan Against Property Easier for a Chartered Accountant

Financial year 2016-2017 saw an increasing number of applications coming in for loans against property. These are secured loans availed by collateralizing any residential or commercial property of the required value and the rates of interest for such loans are much lesser. Loans against property for CA have unique terms as compared to the generic ones as they are meant for a specific category of borrowers.

Here are a few factors that need to be checked by CA professionals when availing a loan against property from either a bank or a Non-Banking Financial Company (NBFC):

Valuation of the Property

The appraiser appointed by the chosen lender will evaluate the property and determine the present value based on which the amount to be sanctioned against this property is to be decided. The common methods used here are cost approach, sales comparison approach, or income capitalization method.

 Loan to Value Ratio

Lending institutions do not provide loans for the entire value of the property to be mortgaged. Banks and NBFCs provide loans of around 50 to 70% of the property’s value. This loan to value ratio is higher for NBFCs as compared to banks.

Cost of Borrowing and Tenure

Different lending institutions charge varying rates of interest for CAs. As these loans are mortgaged, their interest rates are comparatively lower than non-collateralized loans. Tenure can be short term or long term, as per the prference of the borrower.

Availing a dedicated loan against property for Chartered Accountants has tax benefits as well under Section 24 (B) and 37(1) of the Income Tax Act.

To know more about the tax benefits, the reference provided below is to be followed:

Tips That Will Make Taking A Loan Against Property For CA Easier

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