Lease Rental Discounting Loan up to ₹ 100 Cr in India
What is Lease Rental Discounting Loan?
A Lease Rental Discounting (LRD) Loan is a popular and easy financing solution that allows property owners to raise funds against their current or future rental income.
Banks and NBFCs offer LRD loans based on the monthly rent received, lease tenure, tenant profile, and the market value of the property, pledged as collateral.
Thus, LRD loan involves three key parties:
- The borrower, who owns the leased property
- The tenant, who occupies the premises under a valid lease agreement
- The bank or financial institution, which provides funding against the rental cash flow
SMEFundings.com makes it easy to apply for a Lease Rental Discounting loan through a simple online application, digital documentation, and a quick, hassle-free process at the best interest rates.
How Does a Lease Rental Discounting (LRD) Loan Work?
A Lease Rental Discounting (LRD) loan works by allowing property owners to raise finance against their current or future rental income.
The process is simple and structured to ensure security for all parties involved.
Step-by-Step Process of an LRD Loan:
- 1) Document Submission: The borrower submits the required documents to the lender, including:
- KYC documents
- Registered lease or rental agreement
- Financial statements
- Property ownership documents
- 2) Assessment & Due Diligence: The lender conducts a detailed assessment of:
- Borrower’s financial profile
- Tenant’s credibility and lease tenure
- Property valuation
- Legal and technical due diligence of the property
- 3) Loan Sanction: After satisfactory verification and reports, the Lease Rental Discounting loan is sanctioned based on rental cash flow and property value.
- 4) Tripartite Agreement & Escrow Mechanism: A tripartite agreement is executed between the borrower, lender, and tenant.
As per this agreement, the tenant deposits future monthly rent into an escrow account, which is jointly controlled by the lender and borrower.
- 5) EMI Adjustment & Fund Transfer: Every month, the loan EMI is automatically deducted from the escrow account. The remaining rental amount is then transferred to the borrower’s bank account.
This structured mechanism ensures timely EMI payments while allowing the borrower to continue receiving rental income throughout the loan tenure.
Properties Eligible for Lease Rental Discounting (LRD) Loan
A Lease Rental Discounting (LRD) loan can be availed against a wide range of income-generating properties that are leased to reputed tenants. The following property types are generally eligible for LRD financing:
- 1. Residential Property (rented apartments or housing units)
- 2. Commercial Property – Offices, Shops, Showrooms, and other commercial spaces
- 3. Industrial Property – Factories and manufacturing units
- 4. Open Plots (subject to lease structure and lender policies)
- 5. Warehouses and logistics facilities
- 6. Cold Storage Units
- 7. Schools and Educational Institutions
- 8. Hotels – Branded hotel chains, budget hotels, OYO Rooms, etc.
- 9. Hospitals and Healthcare Facilities
Eligibility may vary based on factors such as lease tenure, tenant profile, rental stability, and property location. Banks and NBFCs typically prefer properties leased to financially strong and reputed tenants.
LRD Loan for Build-to-Suit Properties
We offer Lease Rental Discounting (LRD) loans for Build-to-Suit (BTS) properties to individuals and companies to construct commercial, industrial and other projects that will be leased to established tenants.
This loan is sanctioned on the basis of Letter of Intent (LOI) or Lease Agreement signed between property owner and tenant.
The loan eligibility is derived upon the future rental income with year-on-year rental escalations considered.
Our Build-to-Suit LRD financing covers the construction of:
- Commercial properties
- Industrial properties and factories
- Warehouses and logistics facilities
- Schools and educational institutions
- Hospitals and healthcare facilities
- Hotels and hospitality projects
Documents Required for LRD loan
✔
Last 3 Years IT Return, Computation and Financials
✔
Last 12 months bank Statement (where rent is deposited)
✔
Business and Individual KYC
✔
Lease Rental Agreement copy
✔
Profile of a tenant, if not a listed entity
Frequently Asked Questions – Lease Rental Discounting (LRD) Loan
A Lease Rental Discounting (LRD) loan is a type of property loan where banks and NBFCs provide finance against the current or future rental income of a leased property.
The loan amount is based on rental cash flow, lease tenure, tenant profile, and property valuation.
In an LRD loan, the tenant deposits monthly rent into an escrow account as per a tripartite agreement between the borrower, tenant, and lender.
The lender deducts the EMI from the escrow account and transfers the remaining rent to the borrower.
Property owners (Individuals or Companies) with leased residential, commercial, or industrial properties are eligible for an LRD loan, subject to stable rental income, a valid lease agreement, and acceptable tenant and property profiles.
Eligible properties include residential properties, commercial offices, shops, showrooms, industrial units, warehouses, cold storages, schools, hospitals, hotels, and leased open plots, subject to lender policies.
Documents required typically include KYC documents, registered lease agreement, property ownership documents, financial statements, bank statements, and tenant details.
The LRD loan amount is calculated based on monthly rental income, remaining lease tenure, tenant creditworthiness, and market value of the property. Lenders usually offer a percentage of the discounted rental cash flow.
An escrow account is a joint account controlled by the borrower, lender, and tenant. Monthly rent is deposited into this account, from which the loan EMI is deducted before transferring the balance to the borrower.
The tenure of an LRD loan generally ranges from 8 to 15 years, depending on the lease tenure, tenant profile, and lender norms.
Navigating through the world of LRD can feel like a maze, with endless options and varying criteria. That's where SMEFundings.com steps in. Instead of wasting valuable time with trial-and-error, our customers benefit from a streamlined process that connects them with the right bank or NBFC for their specific loan requirements, right from the start.
Customers consistently choose SMEFundings.com for their financing needs instead of directly approaching banks for several compelling reasons:
- Unmatched Domain Expertise for the past 15 years
- Hight Efficiency and Speed, thus reducing unproductive time
- Access to Multiple Options at the single point.
- End-to-End Loan Process Assistance
- Consortium Funding Expertise for the higher loan requirements.
- Transparent and Trustworthy approach, which makes us preferred business loan partner across India.
We also provide