Loan Against Property · Question

How is my property valued when I apply for a loan against it?

Short answer

The lender appoints a qualified valuer, who visits the property, checks it against the documents and estimates its market value and a more cautious realisable value, the figure at which it could be sold if needed. The lender then lends only a portion of that value. The owner does not set the number, and the lender's own policy decides how the valuation is used.

In more detail

Valuation is the lender's way of deciding how much security the property offers. It is not the same as an offer price, an insurance figure or a figure from a property portal.

A valuer typically considers:

Location and surroundings: access, the character of the area and nearby infrastructure
Land and built-up area: measured against the documents
Age, construction quality and condition of the building
Permitted use and whether construction matches approvals
Recent comparable transactions or rates in the locality
Marketability: how easily a buyer would take the property, given its type and legal status

The valuer then arrives at an estimated market value and a realisable value, which is usually more conservative. Lenders normally keep a cushion between the property value and the loan amount, often called a margin, to protect against price falls and recovery costs. The percentage is set by the lender and changes over time, so ask for the current policy.

Why two values appear

The market value reflects what a willing buyer might pay in normal conditions. The realisable value reflects what could be obtained if the lender had to sell without much time. Lenders lean on the more cautious figure.

A small commercial shop

A hypothetical owner of a shop expects a high figure based on a neighbour's sale. The valuer finds that the neighbour's shop faces a wider road and has an approved extra floor. The valuation reflects those differences, and the loan is sized to the lender's cautious value instead.

If the valuation looks inconsistent with the facts, ask for the basis and share corrections in writing.

Key points

An independent valuer, appointed by the lender, inspects and estimates the property's value.
The lender usually relies on a cautious realisable value, not the owner's expectation.
Location, area, condition, permitted use and comparable transactions drive the estimate.
Only a portion of the value is lent, and that margin is set by the lender.

Who this applies to

Owners applying for a loan against a house, shop, office or industrial property.
Applicants surprised by a valuation lower than local asking prices.
Buyers wanting to understand how security value is judged.

Last reviewed 3 October 2026

This answer is general information, not advice on your particular case. Terms, eligibility, and requirements change, so check the current position with the relevant institution or authority. Lalsar Holdings' financial advisory and financing work is advisory and facilitation only. Lalsar Holdings is not a lender. Sanction and disbursement of any credit facility is at the sole discretion of the partner bank, NBFC, or financial institution involved, subject to their own eligibility criteria and credit policy.