How Property Valuations Affect Loan Amounts in Loan Against Property

Many people view property primarily as a long-term investment or a place to live. But what’s often overlooked is that property can also serve as a valuable financial asset. In times of need—such as funding a child’s education, covering medical expenses, or expanding a business, it can be used to unlock funds through a Loan Against Property (LAP).

A LAP, or mortgage loan on property, enables you to raise a substantial loan amount by mortgaging your residential, commercial, or industrial property. Since the property remains in your name, you retain ownership while accessing funds at relatively lower interest rates and with longer repayment terms compared to many other loans.

In this blog, we will explore the crucial role property valuation plays in determining your borrowing capacity and how understanding this can make a real difference in your financial planning.

Property Valuation & Its Role in Determining Loan Amount

When applying for a loan against property, one of the key aspects that determine how much you can borrow is the market value of the property you pledge. Lenders carry out a detailed property valuation before sanctioning the loan.

This valuation helps determine the loan amount based on the loan-to-value (LTV) ratio, which is essentially the percentage of your property’s worth that a lender is willing to offer as a loan. Most lenders in India typically offer between 50% to 70% of the property’s current market value.

For instance, if your property is valued at INR 1.5 crore, and the lender offers a 65% LTV, you may be eligible for a loan of up to INR 97.5 lakhs. A higher property value or a higher LTV ratio can increase the sanctioned loan amount. However, to safeguard against market risks, some lenders may provide a lower LTV as per their internal policies.

Factors Influencing Property Valuation

Here are some key factors that influence the market value of your property:

Location: Properties in prime locations or high-demand neighbourhoods generally have a higher market value.

Type of Property: Commercial properties are usually valued higher than residential ones. If you’re pledging a commercial space, you may be eligible for a larger loan amount, depending on market conditions.

Condition and Age: Newly built or well-maintained properties tend to have higher valuations compared to older or poorly maintained ones.

Ways to Maximise the Market Value of a Property

Below are some ways to improve your property’s market value and potentially increase the loan amount you can secure through a Loan Against Property:

1. Renovate and Repair Strategically

Fix structural issues such as cracks, leaks, or broken fittings. A fresh coat of paint and well-maintained flooring can also enhance your property’s appeal and valuation.

2. Improve the Exterior Look

Upgrading the exterior by repainting walls, maintaining the garden, or fixing pathways can make your property more attractive. A clean and well-kept facade adds to the market value.

3. Utilise Unused Spaces

Make the most of vacant or underused areas. A spare room can be turned into a home office, study, or extra storage space. If you have outdoor space, consider adding a seating area or a kitchen garden.

4. Ensure Legal Compliance

Properties with clear legal titles and no legal disputes are more likely to be favourably valued. Keep ownership documents and property tax records up to date. A dispute-free, legally sound property is more attractive to lenders.

Choose a Trusted Lender for a Fair Property Evaluation

By now, it is well established that the market value of your property plays a key role in determining your eligible loan amount. Since property valuations can differ from one bank to another, it’s important to choose a reliable lender that offers fair assessments.

IndusInd Bank is one such trusted institution that offers a Loan Against Property through a streamlined process and transparent documentation. You can access higher loan amounts and long-term funds, along with convenient features like doorstep services.

To maximise the value of your property, check the loan against property eligibility requirements and apply today at IndusInd Bank!

Author Profile

Adam Regan

Deputy Editor

Features and account management. 3 years media experience. Previously covered features for online and print editions.

Email Adam@MarkMeets.com