Almost every loan against property conversation I have had starts the same way.
“Sir, my building is worth at least ₹12 crore. I only need ₹8 crore. Where is the problem?”
For years I sat on the other side of that sentence — deciding if the bank should lend against property, and later reviewing valuation work for banks. Every Loan Against Property file I reviewed came with a valuation report clipped to the front. Full career on the About page.
What I learned is simple: the number in your head and the number on the bank’s file are rarely the same. Knowing why will save you weeks of frustration.
Which three numbers does the bank use to value my property?
1. Guideline value. This is the Tamil Nadu Registration Department’s reference value for stamp duty, and you can look it up on TNREGINET. Banks record it in the file, but it is not the lending value. In some pockets it sits well below what properties actually sell for. In others, it comes close to the market.
2. Assessed market value. The bank sends its own empanelled valuer. The valuer inspects the property, measures it, checks it against the approved plan, looks at recent comparable sales in the locality and arrives at a fair market value. Not your asking price, and not what a neighbour claims he was offered last year.
3. Realisable or distress value. Many valuation reports also show what the property could fetch if the bank had to sell it in a hurry. A bank officer always keeps one eye on this number, because it is the value that actually protects the loan if things go wrong.
Then the lender applies its loan-to-value (LTV) policy to the assessed value. That ratio varies by lender, product and property type. At many lenders it is more conservative for commercial property, industrial sheds and land than for a self-occupied residence.
So when you say “₹12 crore”, the bank may be looking at a lower assessed value, applying a percentage to it and then checking that against your repayment capacity. The sanction is usually the lower of the two.
Which problems make a bank cut my property’s value?
From the credit desk, these are the issues I saw again and again in Tamil Nadu property files:
Construction beyond the approved plan. An extra floor, a covered terrace, a setback that has been built over. The valuer may simply leave the unapproved portion out of the value, and the legal team may raise questions on top of that.
Approval and title gaps. A layout without DTCP or CMDA approval, a patta still in a late parent’s name, a missing link deed in the chain, an EC that throws up an old charge nobody remembers. Each one is a delay at best and a decline at worst. (See Tamil Nadu property documents: CMDA, DTCP, patta and EC.)
Access and marketability. A narrow approach road, a landlocked plot, a location prone to waterlogging, or a single-purpose building that very few buyers would want. Banks lend against what they can sell.
Age of the building. An older structure has a shorter residual life, which can cut both the value and the tenure the bank will allow.
Usage mismatch. A property approved as residential but running as a shop or godown, or the other way round.
None of these mean your property is bad. They mean the bank cannot count all of it.
What will my property be worth over the whole loan period?
A good bank officer doesn’t only ask, “What is this worth today?” They also ask, “What will this be worth, and how easily could it be sold, over the full tenure of the loan?”
A road widening project, a change in the neighbourhood, a single tenant who could leave, or a building that suits only one kind of business all go into that thinking. Owners naturally value the property they built. Credit has to value the property someone else would buy.
What can I fix before I apply?
Get your documents in order first. Parent documents, patta, a recent EC, the approved plan and the building completion or occupancy papers where applicable. Fix name mismatches before the bank finds them.
Be honest about deviations. If part of the building is beyond the plan, say so upfront and plan the loan amount around the approved portion.
Don’t build your plan on the highest number you have heard. Work backwards from a conservative value, so a lower valuation doesn’t sink the deal or your timeline.
Choose the right property to offer. If you own more than one, the cleanest title and the most marketable asset often gets you a better outcome than the one with the highest price tag.
Consider the structure, not just the amount. A shortfall on one property can sometimes be met with additional collateral, a co-applicant or a different product, such as lease rental discounting for a let-out commercial property, or a CC/OD facility against property for part of a business requirement.
Why do so many owners get a smaller loan than they expected?
Many LAP disappointments are not about the borrower’s income. They are about expectations set before the valuer ever visits.
If you are planning a loan against property in Chennai or a mortgage loan anywhere in Tamil Nadu and want your property and documents read the way a bank credit team would read them, before the bank does, message me on WhatsApp at +91 94450 93336 or use the contact page.
The sanction is always the bank’s decision. But walking in with realistic numbers and clean papers changes the conversation.
CA Jitendraa Rathi Chartered Accountant (CA membership number 217936) | Founder, JR Loan Advisors, Chennai
Written and reviewed by CA Jitendraa Rathi, Chartered Accountant (CA membership number 217936) · Ex-banker, 20 years of experience in credit and lending · LinkedInLast reviewed · Expert review: CA Jitendraa Rathi (ICAI 217936)
Official sources: bank rates and rules change, so check Tamil Nadu patta and land records, SBI loan interest rates, RBI (repo rate and lending rules).