Loan against Property is the perfect way to unlock the hidden value of Borrower’s property. With this loan, the Borrower can fully benefit from life's little surprises he/she may have earlier passed over due to lack of funds. The Borrower can unlock the potential in his property by availing a Loan Against Property (LAP). A LAP is a loan given against the security of his existing property. The benefit is that interest rates on LAP are generally lower than rates on other consumer loans.
FINANCE FOR REAL ESTATE PROJECT
FEATURES OF REAL ESTATE INDUSTRY
Capital intensive industry
Manufacture / Development of long-term assets
Medium-Long term period for completion
Unique method for recognition of revenue
Absence of consistent revenue recognition
“New entity for new project”
TYPICAL CONSIDERATIONS
Lack of transparency
Negative profile from banking perspective
Lack of Corporatization
Legal Hassles
Demand-Supply gap
Lack of Financial discipline
SOURCES OF FUNDS
EQUITY
Key source is Venture Capital / Private Equity Funds (Domestic & Foreign)
Ideally available from land acquisition stage
Used to share risks involved in the Project
Costly compared to Debt / Advance sales
Repayment in mode of profit sharing
Repayments are made based on availability of funds
DEBT
Available only for completion of construction
Used to finance working capital requirement
Cost is less compared to Equity or Sales bookings
Regular interest and installments of principle to be paid as per agreed schedule
Lender does not participate in any risk and gets cover
ADVANCE SALES
Available from Land acquisition stage
Cost is high compared to Debt but low compared to equity
Marketing risk & partly execution risk is assumed by the Investor
Ideal source of funds
KEY CONSIDERATIONS FOR FUNDING
Developer Background
Location of the Project
Entry Valuation
Stake offered & Rights of the investors (Reserved Rights)
