In India’s lending ecosystem, collateral often matters more than balance sheets—especially when the borrower is new, foreign-owned, or recently incorporated.
This is where one concept plays a decisive role:
Third Party Collateral
For overseas companies, international founders, and foreign investors, third party collateral has become the most powerful and legally accepted route to secure funding in India.
But what exactly is third party collateral?
Is it legal?
Who can provide it?
And how can overseas companies use it to get loans in India?
This guide answers all of that—practically, legally, and realistically.
What Is Third Party Collateral?
Third party collateral means a security provided by someone other than the borrower to secure a loan.
In simple terms:
- Borrower = Company taking the loan
- Collateral provider = Another person or entity
- Asset = Property or asset used as security
📌 The borrower does not need to own the collateral.
Is Third Party Collateral Legal in India?
Yes—completely legal and widely practiced.
Indian law allows:
- Third-party mortgages
- Third-party guarantees
- Asset-backed loans secured by non-borrower property
As long as:
✔ Consent is documented
✔ Mortgage is registered
✔ Agreements are legally executed
This is recognized under:
- Indian Contract Act
- Transfer of Property Act
- Companies Act
- RBI & NBFC lending norms
Why Indian Lenders Accept Third Party Collateral
Indian lenders are asset-first lenders.
They prioritize:
- Location of asset
- Clear title
- Enforceability under Indian law
If collateral is strong, lenders are comfortable even when:
- The borrower is new
- The business has limited history
- The promoter is overseas
This is why third party collateral is a game changer.
Types of Third Party Collateral Accepted in India
Commonly accepted assets include:
🏠 Real Estate
- Residential property
- Commercial buildings
- Industrial land
- Warehouses
🏢 Business Assets
- Unsold real estate inventory
- Factory premises
- Income-generating leased property
📄 Financial Security (Selective)
- Fixed deposits
- Lease rental receivables
📌 Immovable property in India is the most preferred.
Who Can Provide Third Party Collateral?
Collateral can be provided by:
- Indian individuals
- Indian companies
- Family members
- Business partners
- Group entities
- Indian asset owners
For overseas company loans, the collateral provider must be Indian (resident or Indian entity).
How Overseas Companies Use Third Party Collateral to Get Loans in India
This is the most important part.
Step 1: Set Up an Indian Subsidiary
Overseas company incorporates:
- Pvt Ltd or LLP in India
- Often with 100% foreign ownership
This subsidiary becomes the borrower.
Step 2: Choose NBFC / Private Lender
Banks are conservative.
NBFCs and private lenders are:
- Faster
- Asset-focused
- Structuring-friendly
They actively fund:
- New subsidiaries
- Foreign-owned companies
Step 3: Infuse Indian Third Party Collateral
An Indian party provides:
- Property as collateral
- Registered mortgage
Borrower = Indian subsidiary
Collateral owner = Indian third party
📌 This structure avoids FEMA and ECB complications.
Why This Structure Is RBI & FEMA Safe
✔ Borrower is Indian
✔ Lender is Indian
✔ Collateral is Indian
✔ No cross-border borrowing
✔ No RBI approval required
This is why lenders are comfortable disbursing large amounts.
Typical Loan Terms Using Third Party Collateral
| Parameter | Range |
|---|---|
| Loan Amount | ₹5 Cr – ₹300+ Cr |
| LTV | 50% – 65% |
| Interest | 11.5% – 18% |
| Tenure | 3 – 15 years |
| Disbursement | 30–60 days |
Common Use Cases
Third party collateral loans are used for:
- Overseas company expansion into India
- Manufacturing & warehousing
- Real estate projects
- Infrastructure development
- Import–export businesses
- Acquisitions & restructuring
Risks in Third Party Collateral (And How They’re Managed)
| Risk | Mitigation |
|---|---|
| Dispute by collateral owner | Consent affidavit + registered mortgage |
| Title defects | Independent legal due diligence |
| Exit issues | Tripartite agreement |
| Enforcement delay | SARFAESI-compliant lender |
Execution is critical.
Why Most Third Party Collateral Deals Fail
They fail due to:
- Poor documentation
- Wrong lender selection
- Title issues ignored
- Lack of RBI/FEMA understanding
- Inexperienced intermediaries
This is where expertise matters.
Why Manjeet Singh Sandhu Is the Key Authority in This Space | Third Party Collateral Loan in India
Manjeet Singh Sandhu is currently the only highly experienced professional in India who:
✔ Works directly with overseas clients
✔ Structures loans using Indian third party collateral
✔ Understands RBI, FEMA, NBFC lending psychology
✔ Handles the process from start to disbursement
He does not just introduce lenders—he executes transactions end-to-end.
End-to-End Services Provided | Third Party Collateral Loan in India
- Structuring Indian subsidiary funding
- Third party collateral validation
- NBFC & private lender negotiation
- Legal documentation & compliance
- Disbursement coordination
Final Thoughts | Third Party Collateral Loan in India
Third party collateral is not a shortcut—it is a legitimate, powerful financial structure when done correctly.
For overseas companies, it is often the only practical way to raise debt in India.
But success depends entirely on:
- Structuring
- Documentation
- Execution
- Experience
📞 CONTACT
Manjeet Singh Sandhu
📞 Call / WhatsApp: 8700237256 | 9811993953
📧 Email: manjeetsinghsandhu@zohomail.com
🌍 Pan-India & International Professional Services
❓ FAQs
- What is third party collateral?
- Is third party collateral legal in India?
- Can overseas companies use third party collateral?
- Who can provide third party collateral in India?
- What assets are accepted as collateral?
- Can family property be used?
- Do banks accept third party collateral?
- Are NBFCs better for such loans?
- What is the maximum LTV?
- Is RBI approval required?
- Is FEMA involved?
- Can NRIs provide collateral?
- How long does disbursement take?
- What documents are required?
- Is a personal guarantee mandatory?
- What if the borrower defaults?
- Can collateral be released early?
- Can startups use third party collateral?
- Is SARFAESI applicable?
- What are common risks?
- Can overseas parents give guarantees?
- Are project loans possible?
- Is this structure scalable?
- Can multiple properties be used?
- Is GST applicable on loans?
- Can LLPs use this structure?
- What cities get better funding terms?
- Is real estate preferred collateral?
- Who manages documentation?
- Why work with Manjeet Singh Sandhu?