Legal Guide

Concept of Commercial Mortgage In India

by Shalini Vashistha · 3 min read

Commercial Mortgage

Introduction

A person needs a fund to start a new business or any new thing so he applies for a Loan. But in return for a Loan, some things should be mortgaged by that person. 

Now, what is a mortgage? A mortgage is an agreement that is signed by a person who borrows money from a lender in return for real estate as a guarantee until the total amount is repaid and it is dealt with by the Transfer of Property Act, of 1882. Therefore, a mortgage generates an interest in the immovable property even if it does not really transfer ownership to a third party. 

The Commercial Mortgage is one of the mortgages and here we will discuss the same.

What is Commercial Mortgage?

A Commercial Mortgage allows you to get substantial capital by mortgaging commercial real estate that you own. The commercial property might be used for your business or for any other profit-generating purpose.

Essentials to get Commercial Mortgage

For salaried individuals-

  • Should be a resident of India 
  • Depending on the lender, the upper and lower age restrictions may change, although they typically range from 18 to 70 years old.
  • A sufficient quantity of professional experience at a reputable private or public organization
  • Salary of Rs. 25,000 or more every month (different for different lenders)

Self-employed people should-

  • Should be a citizen of India
  • Must possess a credible and consistent source of income
  • Again, each lender sets a different higher and lower age limit in this case.

For salaried individuals-

  • Should be a resident of India 
  • Depending on the lender, the upper and lower age restrictions may change, although they typically range from 18 to 70 years old.
  • A sufficient quantity of professional experience at a reputable private or public organization
  • Salary of Rs. 25,000 or more every month (different for different lenders)

Self-employed people should-

  • Should be a citizen of India
  • Must possess a credible and consistent source of income
  • Again, each lender sets a different higher and lower age limit in this case.

Documents needed for Commercial Mortgage

  • A person must be the owner of a business property free from encumbrances. 
  • A piece of evidence proving your residency and identity like a PAN card, voter ID, Driver’s license, or passport.
  • Bank account statements, income tax returns, etc., are examples of proof of income.
  • Property-related documents such as the buyer’s contract and title deed.
  • Other paperwork like records relating to the company in the case of self-employed applicants.

Rights and Duties of Mortgagor (The person who borrows the money)

Rights

  • If the mortgagor fully repays the mortgage on the due date and completes all contractual duties, the mortgagor may request that the mortgagee transfer any mortgage deeds and other documentation pertaining to the mortgaged property that is in the mortgagee’s possession.
  • The ability to request that the mortgagee transfer the mortgaged property to a third party and then retransfer it to the mortgagor is known as transfer to a third party. It can only happen if the right of retransfer is specified in the original contract, the mortgagee is not in possession of the property, and the right of redemption is still in effect.
  • Examining and producing papers grant the mortgagor the right of redemption to see and make copies of any mortgage-related documents held by the mortgagee.

Duties

  • As long as the mortgagee is not in possession of the mortgaged property, the mortgagor is obligated to pay any public costs that become payable in relation to the property.
  • The Mortgagor is responsible for timely interest payments to the Mortgagee.
  • When the mortgaged property is leased by the mortgagor, it is his responsibility to instruct the lessee to pay the mortgagee the rent and other fees.
  • It is the responsibility of the mortgagor to refrain from any actions that result in the loss of property or that lower the market value of the mortgaged property.

Rights and Duties of Mortgagee (The person who lends the money)

Rights

  • A mortgagee has a right to take possession of the property at the very moment when the deed is done.
  • The authority to name a receiver over the mortgaged property belongs to the lawful mortgagee. The receiver’s job is typically to gather rent and earnings from the mortgaged property in order to pay off debts, rates, and taxes, as well as to pay the mortgagee the Loan amount.
  • The ability to take the mortgagor to court to recoup the Loan amount and any accumulated interest.
  • Once the mortgagor defaults in repaying the Loan sum at the agreed date, and there are no contrary intentions in the mortgage deed, the right to sell gets activated, and Mortgagee can sell the property.

Duties

  • He has a responsibility to care for the property in the same manner as a normally wise individual would if it were his own.
  • The mortgagee is required to make every effort to recoup the rent and profits owed on the mortgaged property.
  • The mortgagee has a responsibility to refrain from taking any action that may harm the mortgaged property.
  • It is the responsibility of the mortgagor to keep all records of the funds received and spent by him in his capacity as a mortgagee and to provide true and accurate copies of such documents upon request.
  • He has a responsibility to pay all taxes and other fees of a public character while the mortgaged property is in his possession.

Procedure to get a Loan against Commercial Mortgage

  • The first step is to provide the necessary information. Enter your information, the property value you are ready to promise, your financial background, and other factors to prove your legitimacy. In an Application form.
  • Then the representatives of the relevant lending organization get in touch with you to check your financial background and the details of your property. The lender runs a credit check here, which is important for approving Loans. A successful confirmation triggers the next step in the Loan procedure.
  • Next, you will be requested to upload and submit the necessary paperwork, including identification, income, address, and property documentation proofs to do legal document verification of property. Your lender’s requirements will determine the layout and format of your document submission.
  • After providing the required paperwork, you must wait while the lender does its verification of documents. A credit analyst team compares your documents and the information you supply in the application procedure. Once more, the verification procedure varies from Loan provider to Loan provider. Some businesses demand in-person verification by going to the applicant’s place of employment or residence.
  • After that, you receive your Loan sanction letter after your lender has checked and confirmed your creditworthiness. You are permitted to review the Loan terms and conditions at this time.
  • Legal check and property evaluation: The field verification team for the Loan provider thoroughly examines your financial documents and real estate records using legal resources.
  • After completing the processes listed above, you will receive the funds in your account. Getting funds in a shorter amount of time is now achievable because of digitization in the financial sector.

Conclusion

The mortgage is one of the ways which helps small businesses to grow as they can get money by mortgaging something which they need, but there are numerous liabilities also which come with the mortgage, and the Commercial Mortgage is the easiest way to get a Loan. To know more about the concept of commercial Loans, get Legal consultation here.  

To get a Loan for a business or other purposes, a Commercial Mortgage is an easy way. To know more about the same, get advice here.

Shalini Vashistha

Written by

Shalini Vashistha

Get Expert Legal Advice For

Commercial Mortgage

Related Articles

Hi there 👋!

How can I help you?

whatsapp