What LAP Really Is — A Mortgage Without a House Purchase

A Loan Against Property (LAP) mortgages property you already own — residential, commercial, or in many cases industrial or plotted land — to raise funds for any legitimate purpose. The title deeds sit with the lender; you keep living in or earning rent from the property. Because the security is hard real estate, pricing lands between home loans and unsecured credit: 9–12% at banks in 2026, against 14–24% for unsecured business or personal loans.

The product's real users: business owners unlocking capital trapped in property, families funding overseas education beyond education-loan caps, and borrowers consolidating multiple expensive debts into one long-tenure, lower-rate facility.

How Much You Can Borrow — and Why It's Less Than You Think

Lenders apply two independent filters, and you get the lower of the two outcomes:

1. LTV filter: 50–65% of market value for commercial property, 60–70% for residential (self-occupied valued higher than rented). Banks instruct their own valuers, whose figure typically lands 5–15% below prevailing market chatter.
2. Income filter (FOIR/DSCR): all your EMIs including the proposed one generally cannot exceed 55–65% of net monthly income — or for businesses, cash profits must cover total EMIs about 1.25–1.5 times.

A ₹2 crore property therefore doesn't promise a ₹1.3 crore loan; if your documented income supports only ₹70 lakh of EMIs, ₹70 lakh is the sanction. This income test is why LAP paperwork resembles a business-loan file more than a gold-loan slip.

The Tax Angle Almost Everyone Gets Wrong

LAP interest is not automatically deductible. Deductibility follows the end use, not the collateral:

• Funds used in business: interest is fully deductible as business expense under Section 37(1) — keep an audit trail from disbursal to deployment.
• Funds used to buy/construct another property: deduction possible under Section 24(b) within its limits (old regime, self-occupied) — documentation is critical.
• Personal uses (wedding, travel, medical): no deduction under any regime.

Mixed use ruins claims: if ₹50 lakh is drawn and only ₹30 lakh demonstrably entered the business, only that proportion of interest survives scrutiny.

SARFAESI — The Clause That Makes LAP Serious

LAP from banks and large NBFCs falls under the SARFAESI Act: after 90 days of default and due notice, the lender can take possession of and auction the property without a court order. The process includes a 60-day demand notice and rights of representation — but it is fast by design. The discipline this demands is simple: never size a LAP against optimistic future income, and maintain a 3–6 month EMI buffer. Pledging the family home to fund a speculative venture is the classic LAP misuse story.

LAP vs Top-Up vs Gold — Picking the Cheapest Secured Rupee

If you carry a live home loan, always price a top-up first — it's usually cheaper and faster than fresh LAP on the same property.

Frequently Asked Questions