Loan Against Property: Analysing Market Trends and Future Prospects

What is Loan Against Property

A Loan Against Property is a secured loan where you can Mortgage your assets as collateral for borrowing money. The loan amount is usually a percentage of the market value of the Mortgaged property- typically 50% - 65%.

The amount secured is higher than what one might obtain via a personal loan and can be used flexibly for personal or business needs. LAPs generally come with a lower interest rate because unlike unsecured loans the lenders here have security. It help’s tap into the value of your assets without actually needing to sell it. Read on to know about the market trends and future prospects of LAP.

Growth of LAP

Loan Against Property’s growth in India has a lot to do with rising credit demand especially among self-employed individuals and businesses. People with property who require huge amounts of funding usually opt for LAP due to its reduced interest rates. That said, even those who want smaller amounts of loans can still go for LAP.

Current market trends

The Loan Against Property market in India is experiencing tremendous growth which is driven by increasing borrower needs, technological advancements and economic policies. India’s Loan Against Property market is expected to reach a value of 1598.23 billion USD by 2030. The market is also anticipated to have a compounded annual growth rate of 9.2% from 2020-2025.

The digitalisation of the lending process has fuelled the involvement of Non-Banking Financial Companies and Banks in offering LAP to meet the diverse customer needs. They account to over 50% of the market. Traditional banks and Non-Banking Financial Companies are increasingly leveraging digital platforms to streamline the loan process. Online application portals, digital documentation, AI-driven risk assessments, and real-time property valuation tools have significantly reduced the turnaround time for loan approvals. This not only enhances customer experience but also widens the pool of eligible borrowers.

Future Prospects

Loan Against Property is poised for significant growth due to constantly increasing credit demands. Increasing awareness about LAP and its benefits such as lower interest rates than unsecured loan and longer repayment tenure is bound to fuel its customer base.

Digitalisation and automation of the loan process helps lenders tap into untapped or underserved markets. This includes a vast segment of our population that have no idea about LAP. Generating interest and awareness about this will boost credit availability for niche markets.

Apart from this, ESG (Environment, Social and Governance) has started gaining traction in financial services thus prioritising loans that support green projects, energy efficient projects, women led businesses etc.

Challenges and Consideration

Despite its promising trajectory, LAP faces a lot of challenges. The main one being the lack of awareness among many potential borrowers particularly in rural areas. Many are unaware that their property can be monetised without it being sold.

Additionally, property related issues such as lack of proper documentation, unclear titles, legal disputes etc can cause problems in the loan process. The risk of their asset being seized in case of default in timely repayment of the loan is another factor that should be considered.

Conclusion

Loan Against property is a segment that continues to grow and evolve over time. Current market trends show growing customer interest, digitalisation of processes, and increasing access to credit.

Looking ahead LAP offers exciting possibilities of enhanced efficiency and inclusivity. For borrowers this could mean faster and more transparent credit options and for lenders it signals a new era of customer centric innovation.