When most people talk about taking out a mortgage or getting a property loan, they are usually referring to residential property. But if you are buying commercial property, for your business or investment purposes, it is a bit harder to find the information you need on commercial property loans.
At first glance, buying a commercial property may seem similar at first, but financing and regulations differ significantly. You look through property listings or engage a property agent, view potential properties, commit to a purchase and then source for a loan. Seems straightforward, right?
However, there are some ways a commercial property transaction differs from one involving residential property, including the type of loan you should be taking out.
Commercial Property Singapore: What Is a Commercial Property Loan?
As its name suggests, a commercial property loan is a loan that finances the purchase of a commercial property. These loans are sometimes also referred to as business property loans.
Like residential property loans, commercial property loans can be classified as fixed interest rate loans or floating interest rate loans. Fixed-rate loans lock down a fixed interest rate for a number of years before the interest rate becomes floating, thus fluctuating. Floating rate loans, on the other hand, have interest rates that fluctuate from the beginning of the term, meaning that loan repayments can vary from month to month.
Difference Between Residential Property Loans and Commercial Property Loans
Here’s a quick summary of the differences between residential property loans and commercial property loans in Singapore:
Maximum LTV limit
HDB loans ~75%, Bank residential loans ~75%
Banks may lend up to 80%, depending on property type and risk; no MAS‑regulated cap
What affects the amount you can borrow
Property value and borrower credit score
Property type, intended use, cash flow potential, risk assessment, market conditions, and borrower financial standing
Length of tenure
HDB up to 30y, non-HDB up to 35y (subject to borrower age constraints)
Typical bank tenure 20–30y; may vary depending on property type and bank policy
Note: Always inspect the property personally before committing, as MAS/banks do not provide information on property condition, remaining lease, or environmental factors.”
Commercial Property Singapore: What Affects How Much You Can Borrow?
Residential property loans tend to be quite similar across the board in terms of how much money you can borrow for any given property, with the value of the property being the bank’s main consideration apart from your financial standing/credit score.
Commercial property loans, on the other hand, tend to be far more varied, and many factors might be considered by the bank in order to determine the loan amount to extend to you, including the anticipated use of the property, anticipated returns, type of property, perceived risk and market conditions.
Commercial Property Singapore: What Is the LTV Limit?
For residential properties, you can get a loan that is up to 80% of your property’s purchase price or valuation for HDB-granted loans, and 75% for bank loans.
But as a business, you are not subject to TDSR, but banks will still assess your repayment ability and overall risk profile. As mentioned, how much you can loan is dependent on your financial standing. For commercial property loans, you may be able to obtain up to around 70 – 80% LTV, depending on the bank and risk profile.
Commercial property loan terms, including LTV and tenure, are determined by individual banks and may vary significantly.
Commercial Property Singapore: What Is the Loan Tenure Duration?
Commercial property loans in Singapore tend to have a lower loan tenure than residential property loans. Most banks offer a loan tenure of 25 to 30 years for commercial property loans. However, do note interest rates for commercial property loans tend to be higher than those for residential property.
The rule of thumb is the longer your loan tenure, the more interest you’ll pay. All these factors can make it more restrictive and costly compared to residential loans to take out a commercial property loan.
Commercial Property Singapore: Do I Have to Pay ABSD?
Additional Buyer’s Stamp Duty (ABSD) is payable on investment residential property purchases by Singapore citizens who already own an existing property, as well as all Permanent Residents and foreigners buying any property. On the other hand, no ABSD is charged on commercial property.
This can make purchasing commercial property more affordable than multiple residential properties, despite the more stringent loan requirements and higher interest rates.
But you will need a higher cash outlay. Buyers should be aware that CPF savings cannot be used at all for commercial property purchases or loan repayments, meaning a significantly higher cash outlay is required. In addition, if you are buying commercial property from a GST-registered company, you will need to pay 9% GST (as of 2024). That’s on top of having to pay Buyer’s Stamp Duty (BSD) and property tax.
The GST charge must be absorbed by you if you are buying as an individual or on behalf of a non-GST-registered entity. On the other hand, if you are buying the property on behalf of a GST-registered company, you can make a claim for the GST paid on the property purchase.
Commercial Property Singapore: Who May Need Commercial Property Loans
Unlike buying a home, which often involves catering to personal preferences, buying commercial property tends to be an entirely commercial decision. Therefore, it is imperative to thoroughly research the property market as well as the kind of property and location that would best suit your business’s needs if you intend to buy as an owner-occupier.
The key reasons why people buy commercial property in Singapore include the following:
As an Investor
Investors buy commercial property in order to monetise it, usually by renting it out and potentially reselling it at a later date for capital gains. Investors do not occupy the property themselves but rent them out to other businesses or individuals.
Investors can be either individual or institutional. Institutional investors, which can include banks, insurance companies or hedge funds, typically purchase commercial properties through an agent. Individual investors include people who buy commercial property in order to obtain investment gains either for themselves or their businesses.
As an Owner-occupier
Owner-occupiers are those who purchase a commercial property to be used by themselves or their businesses. For instance, a business owner buying commercial property to be used as office space for his or her enterprise would be making the purchase as an owner-occupier. Unlike owner-occupiers of residential property, owner-occupiers of commercial property do not enjoy lower property tax rates.
Owner-occupiers tend to take special care to select properties with locations and building types that are best suited to their business needs. For instance, factors such as accessibility of the location and appearance of the building will have an impact on whether potential employees would be willing to travel there.
Owner-occupiers may also wish to have the option to build from scratch or undertake major renovations in order to customise the property to the needs of the business. These factors might affect your commercial property loan, so be prepared to submit your plans to the bank.
How Much Are Commercial Property Loan Rates
Commercial property loan rates are not publicly published and vary across banks, typically higher than residential rates due to higher risk. If you are applying for a commercial loan, know that the loan process for commercial property loans tends to be more personalised than that for residential property loans.
Each deal is tailor-made according to the details of your property transaction. Applicants usually have to get in touch with specific banks in order to discuss their commercial property transactions. Based on the particulars of the situation, the bank will advise on what documents to submit in your application.
You will have to check you fulfil the eligibility criteria for commercial property loans. For instance, some common conditions include:
- Depending on the bank, the company typically required to be incorporated for at least 12–24 months (varies by bank)
- Your business must be at least 30% owned by Singaporeans and/or PRs
- Your company’s turnover is $20 million or less.
If your business has a smaller local ownership structure or turnover of more than $20 million, you can still take out a loan with a bank. But your commercial property loan will not be classified under SME banking.
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