In the Indian commercial real estate (CRE) sector, capital efficiency is the difference between a thriving enterprise and one burdened by debt. As of January 2026, the lending landscape has undergone a significant shift.
With the Reserve Bank of India (RBI) maintaining the Repo Rate at 5.25% after a series of tactical cuts in 2025, a unique window has opened for Indian business owners to lower their interest burden.
If your commercial loan was sanctioned between 2022 and 2024, you are likely locked into a high-interest regime. Today, commercial mortgage refinance rates are significantly more competitive, offering a prime opportunity to “Balance Transfer” (BT) your debt to a more affordable lender.
This guide provides an expert-led analysis of current rates, the mechanics of switching lenders in the Indian context, and the regulatory protections now available to MSMEs.
What Are the Current Commercial Mortgage Refinance Rates in India (January 2026)?
In 2026, commercial lending rates are primarily driven by the External Benchmark Lending Rate (EBLR). Unlike the older MCLR system, EBLR-linked loans ensure that when the RBI drops the repo rate, your interest rate drops almost immediately.
Currently, the lowest rates are found within Public Sector Banks (PSUs), while Private Banks and NBFCs offer higher flexibility at a slightly higher premium.
Lender-Wise Interest Rate Comparison (Jan 2026)
| Lender Category | Indicative Interest Rate (p.a.) | Average Processing Fees | Primary Advantage |
| Public Sector Banks (SBI, BoB, Union Bank) | 8.00% – 9.15% | 0.25% – 0.40% | Lowest ROI, no hidden costs. |
| Top Private Banks (HDFC, ICICI, Axis) | 8.45% – 10.50% | 0.50% – 1.00% | High speed, digital-first process. |
| NBFCs (Bajaj, Tata Capital, Godrej) | 9.75% – 12.50% | 1.00% – 2.00% | High LTV, liberal documentation. |
| Foreign Banks (HSBC, StanChart) | 8.20% – 9.80% | Custom | Best for Grade-A Office assets. |
Disclaimer: Rates are based on current market averages and are subject to the borrower’s CIBIL score (750+) and property valuation.
How Does the RBI’s 5.25% Repo Rate Impact Your Refinance?
The RBI’s decision to hold the Repo Rate at 5.25% in the January 2026 MPC meeting signals a period of relative stability.
For a business owner, this means:
- Lower Base for EBLR: Most banks have a “Spread” over the repo rate. For example, if a bank’s spread is 2.75%, your final ROI is 8.00% ($5.25\% + 2.75\%$).
- MCLR to EBLR Transition: If your current loan is still on the MCLR (Marginal Cost of Funds based Lending Rate) system, you may be paying 9.5% to 10.5%. Refinancing allows you to jump to the more transparent EBLR system.
- Increased Liquidity: Banks are currently aggressive in their “Balance Transfer” targets for Q4 FY26, leading to waivers on processing fees for high-value commercial properties.
When Should You Consider Switching Your Commercial Loan?
Refinancing is not always beneficial. In India, the high “entry-exit” costs (Stamp duty and MODT) mean you must be strategic.
Use the following triggers to decide:
- The “1% Interest Gap” Rule: If your current interest rate is 9.5% and a new lender offers 8.4%, the 1.1% difference is significant. On a ₹5 Crore commercial loan, this translates to an annual saving of ₹5.5 Lakhs.
- Switching for a “Top-Up” Loan: If your property value has increased (e.g., a warehouse in Pune or an office in Bengaluru), you can refinance to a higher loan amount. This “Top-up” provides business capital at mortgage rates (8.5%-9.5%), which is far cheaper than an unsecured business loan (14%-18%).
- Moving from an NBFC to a Bank: Many startups and SMEs take initial loans from NBFCs due to flexible eligibility. Once your business has 3 years of stable ITRs and GST filings, you should migrate to a PSU or Private bank to slash your interest rate by 2% to 3%.
How to Refinance a Commercial Mortgage in India?
The process of “Balance Transfer” in India requires navigating through two banks simultaneously.
Step 1: Obtain the “List of Documents” (LOD) and Foreclosure Letter
Your current bank must provide a letter stating they hold your original property documents and a “Foreclosure Statement” showing the exact outstanding amount.
- Pro Tip: This often triggers a “Retention Call” from your current bank where they might match the competitor’s rate to keep you.
Step 2: Technical & Legal Valuation
The new lender will send an empanelled engineer to value your property and a lawyer to verify the “Title Chain.” In 2026, banks are increasingly focusing on the Occupancy Certificate (OC) and Approved Building Plans.
Step 3: Sanction and NoC (No Objection Certificate)
Once the new bank issues a Sanction Letter, they will issue a cheque/transfer in the name of your old bank. Your old bank then issues a NoC, stating the loan is closed.
Step 4: Retrieval and Re-mortgage
The most critical step: your old bank releases the original title deeds (usually within 15-21 days). These are then handed over to the new bank to create a fresh MODT (Memorandum of Deposit of Title Deeds).
Hidden Costs: How Does the “ROI vs. Net Savings” Trap Impact Commercial Loan Refinancing?
While commercial mortgage refinance rates might look attractive, you must factor in the “Switching Costs.” In India, these are not negligible.
- Foreclosure Penalties: Under RBI guidelines effective Jan 1, 2026, floating-rate loans to Micro and Small Enterprises (MSEs) generally carry zero prepayment charges. However, for large Corporates or Fixed-rate loans, this can be 2% to 4%.
- MODT/Stamp Duty: This is a state-levied tax for registering the mortgage.
- Maharashtra: 0.3% of loan amount.
- Karnataka: Recently revised, registration fees for property-related documents doubled to 2% in late 2025.
- Legal & Valuation Charges: Usually a flat fee of ₹25,000 to ₹50,000.
PSU Banks vs. Private Banks vs. NBFCs: Which Lender Type Is Best for Commercial Loan Refinancing?
| Feature | PSU Banks (e.g., SBI, BoB) | Private Banks (e.g., ICICI) | NBFCs (e.g., Bajaj) |
| Average ROI (2026) | 8.15% | 8.60% | 10.25% |
| Approval Time | 30–45 Days | 14–21 Days | 7–10 Days |
| Tenure | Up to 15 Years | Up to 20 Years | Up to 15 Years |
| Transparency | Very High | High | Moderate |
What Are the Key Documents Required for Refinancing in India (2026)?
Lenders have become more data-driven. Keep these ready to expedite your application:
- Entity Proof: GST Registration, PAN Card, Partnership Deed/MOA & AOA.
- Financials: Audited Balance Sheets and P&L for the last 3 FYs (FY23, FY24, FY25).
- Banking: 12 months’ statement of your Primary Business Account.
- Property Paperwork: Original Sale Deed, Mother Deed (Chain of Title), Approved Plan, and latest Property Tax receipts.
- Existing Loan Details: Statement of Account (SOA) and the original Sanction Letter.
Summary: Is Refinancing Right for You?
Refinancing your commercial mortgage in 2026 is a math-driven decision. With the Repo Rate at 5.25%, the environment is ripe for a switch. However, you must ensure that your total savings over the remaining tenure exceed the 1% to 2% “Switching Cost” (MODT + Processing Fees).
Expert Checklist for 2026:
- Verify your MSME status to avoid foreclosure penalties.
- Check the State-specific MODT rates (especially if your property is in Bangalore or Mumbai).
- Negotiate the “Spread” over EBLR, not just the starting interest rate.
FAQs
Can I refinance my commercial loan if the property is currently vacant?
Most banks prefer properties with a “Rental Yield” or an owner-occupied business. If the property is vacant, banks may reduce the LTV (Loan to Value) to 40-50% instead of the usual 65-70%.
Are foreclosure charges legal for commercial loans in India?
As of January 2026, RBI prohibits prepayment penalties on floating-rate loans for individuals and Micro/Small Enterprises. For large companies (Non-MSME), banks are permitted to charge as per their board-approved policy, usually 2-3%.
How does my CIBIL score affect my refinance rate?
In the EBLR regime, CIBIL is everything. A score of 750-800+ gets you the “Best Available Rate” (lowest spread). A score below 700 may result in a “Risk Premium” of 0.5% to 1.5% added to your interest rate.
Can I switch from a Commercial Loan to Lease Rental Discounting (LRD)?
Yes. If you have a long-term MNC tenant (Grade-A lease), you can switch your mortgage to an LRD. LRD rates in 2026 are often 0.25% to 0.50% lower than standard commercial refinance rates.
