Loans Against Property: Why Lenders Are Pushing LAP
Why in the news
In May 2025, lenders leaned towards loans against property (LAP) as defaults rose in unsecured retail credit.
Key facts
- LAP: loan secured by property collateral.
- MSME LAP market: ₹11.3 trillion; micro-LAP: ₹1.6 trillion.
- Mortgage loans, including LAP, grew 19% yearly.
LAP versus unsecured
| Aspect | LAP | Unsecured personal loans |
|---|---|---|
| Risk | Lower | Delinquency 3.5%-3.6% |
| Growth | Strong | Sharp slowdown |
| Margin | Protects NIM better | Weaker |
Why lenders prefer LAP
- Collateral cuts risk; competition is milder than in home loans, where affordable housing policy adds pressure.
- After higher risk weights on unsecured loans, banks turned selective.
Exam angle
- NIM = Net Interest Margin.