The State-owned, private sector and foreign banks in India are coming out with schemes that offer loans against property. Also called LAP schemes, it allows an individual or a business to acquire a loan against residential or commercial property in India and use it for a variety of purposes.

These loans are usually given up to 60 per cent of the market value of the property. Driving this trend is the awareness among customers that they can get loans in India at lower rates of interest than is available in case of other competing products such as personal loans. Also banks consider such loans a safe bet as it is collateralised against property.

Centurion Bank of Punjab (CBoP) has been offering LAP since late 2004 and has witnessed a growth in excess of 40 per cent. Seeking to take LAP to Tier I and II cities from the metros, what has worked from the bank is its singular approach, different from those of competing banks.

Though banks have a set limit of Rs 80 lakh for disbursing loans in this scheme (and some stipulate a minimum property value), for CBoP the loan amount could even go up to Rs 5 crore depending on the market value of the property and the individual’s repayment capacity.

Also, the bank tailors its offering to the requirements of the borrower. Moreover, CBoP offers borrowers flexibility with both EMI-based loans and an overdraft facility in LAP.

In LAP, the private sector bank has been targeting self-employed individuals, both professional and non-professional categories such as traders, importers, store-owners, and suppliers.

Other banks to join the bandwagon include ICICI Bank, HDFC Bank, Citibank, State Bank of India, Union Bank of India, and Bank of Baroda.

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