Commercial Mortgage

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Until recently, the Indian commercial mortgage industry was under the unorganized industry. The government of India's liberal economic policy in the early 1990s changed the whole scenario of mortgage loan market in India.

Especially, the Indian commercial mortgage sector witnessed a sea of change in the last 15 years. The last decade and half witnessed an astronomical rise of the Indian manufacturing industry which accelerated the growth of infrastructure industry in India. Furthermore, with the growth of infrastructure industry in India, the Indian mortgage loan industry witnessed a tremendous growth. Today, the organized commercial mortgage loan sector of India is registering huge growth and it is estimated to become a US$ 18 billion industry in the time to come.

The Indian commercial mortgage loan industry is consistently registering 20-50 % growth on a year-on-year basis from the year 2000 onwards. This industry is regarded as a sleeping giant with respect to its huge business potential in India. Huge real estate requirements for new office spaces and commercial business places and its subsequent development have fueled tremendous growth of Indian commercial mortgage industry.

This has helped the commercial mortgage industry of India to break open from its age-old image of being a housing mortgage facilitator only. Today, the types of commercial mortgage that are being accepted as collateral are varied and not confined to residential properties only - it has extended to all possible immovable property and mortgage-funding business. The various types of commercial mortgage accepted as collateral security for facilitating mortgage loans in India are as follows -

  • Amusement parks
  • Bowling centers
  • Casinos
  • Auto care centers
  • Auto dealerships
  • Car washes
  • Parking garage
  • Truck terminal
  • Conveniences stores
  • Distribution centers
  • Fitness centers
  • Franchises
  • Funeral homes
  • Gas stations
  • Golf courses
  • Malls
  • Retail (anchored, single tenant, unanchored)
  • Mobile home arks
  • Movie theaters
  • Resort
  • Restaurants
  • Hotels
  • Motels
  • Hospitals
  • Medical clinics
  • Medical offices
  • Nursing homes
  • Rehabilitation facilities
  • Skilled nursing facility
  • Special purpose property
  • Child care centers
  • Independent living facilities
  • Mixed use properties
  • Single family
  • Offices (multi-tenant, single tenant)
  • Warehouse
  • Industrial parks
  • Industrial buildings
  • Land developments
  • Mini warehouses
  • Office buildings
  • Outlet centers
  • Educational institutions
  • Training institutions
The market leaders in organized Indian commercial mortgage sector are housing finance companies like LIC Housing Finance, HDFC, and ICICI Home Finance. According to sources, the estimated size of the commercial mortgage industry in India account only for 25% of the total housing investment in India and the majority of these were being facilitated by the Indian housing finance companies. Financial institutions like commercial banks, cooperative banks, and other non-banking financial companies had a paltry share in the aforesaid industry. Recent trends suggest that these institutions are also registering steady growth of 20-50 % on a year-on-year basis, from the year 2000 onwards. The disheartening fact amongst this fast growing industry is that the activities of this industry are confined to urban India only and it is yet to cover all sections of Indian society. The main growth retarders of commercial mortgage industry in India are as follows -

  • Ignorance amongst masses
  • Poor accessibility
  • Lengthy processing time
  • Elaborate documentation
The government of India has devised plans to help the commercial mortgage industry in India develop and grow to its full potential and help India realize its economic goal.

Last Updated on 5/26/2011