Buyers walk into industrial deals expecting a home-loan experience: high loan-to-value, long tenure, CPF to soften the cash outlay. Industrial financing works nothing like that. Here's what tends to surprise first-time industrial buyers — and what to line up before you commit.
Lease decay dictates everything
The single biggest factor in an industrial loan isn't the price — it's the remaining lease. Most industrial properties are leasehold, and banks size both the loan tenure and the amount against how many years are left.
The shorter the remaining lease, the shorter the loan tenure a bank will offer, which pushes up your monthly repayment. Drop below certain thresholds and lenders start trimming the loan-to-value or declining the deal outright. A unit that looks cheap on paper can be expensive to finance precisely because its lease is running down.
Always underwrite the deal on the remaining lease, not the original tenure. It's the number that decides your loan.
Loan-to-value is lower than you think
For residential property, buyers are used to high LTV. Industrial property is more conservative — expect to fund a meaningfully larger share in cash, and budget for the down payment to land around 20% of value or more, depending on the property and your profile.
Two things compress it further:
- Valuation gaps. Banks lend against the lower of price or valuation. If the property values below your agreed price, you top up the difference in cash on top of your down payment.
- Lease and condition. Older buildings and shorter leases pull the offered LTV down.
You can't use CPF
This catches people every time. CPF can only be used for residential purchases. Industrial property is funded entirely by cash plus your bank loan — there's no CPF cushion for the down payment or the monthly instalment. Plan your cash position accordingly.
GST is part of the cheque
Industrial property is subject to GST on the purchase price (homes are not). If your buying entity is GST-registered, you can generally claim it back as input tax — but you still need the cash to pay it at completion, and the timing gap can strain your working capital. If you're not GST-registered, it's a straight added cost.
How banks assess you matters
- Buying through a company? The bank looks at your company's financials, cash flow, and directors' profiles — not a personal income-ratio test.
- Buying as an individual? You'll be assessed against the Total Debt Servicing Ratio, so existing loans directly reduce what you can borrow for the factory.
Structuring the purchase in the right entity, before you apply, can change both your approval odds and your tax position.
Rates and structure
Industrial loans typically price higher than home loans and are often pegged to a floating benchmark. Lock in clarity on:
- the interest rate basis and how often it resets,
- the lock-in period and any prepayment penalties,
- whether the bank requires a fire-insurance assignment and other conditions before drawdown.
A practical pre-approval checklist
Before you put down a cheque, have these ready:
- Remaining lease confirmed — and run the loan tenure against it, not the original tenure.
- Independent valuation — so you're not blindsided by a financing gap.
- Cash buffer — down payment, GST, stamp duty, and a valuation-gap top-up.
- The right buying entity — individual versus company, decided before you apply.
- In-principle approval — so your offer is credible and you're not financing blind.
None of this is meant to scare you off industrial ownership — it's a sound move for the right business. But the financing has more moving parts than a home loan, and the buyers who prepare for them close faster and on better terms. If you want help pressure-testing a deal before you commit, that's what we're here for.