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Lease rental discounting

  • Overview

    Lease Rental Discounting (often shortened to LRD) is a term loan that is offered against properties that generate rental income. With this financial option, property owners can avail higher financing against rental receipts. The LRD full form stands for Lease Rental Discounting, a term frequently encountered in banking and finance.

  • Lease rental discounting features and benefits

    • High-value financing

      Get convenient access to high-value funding with lease rental discounting, to take care of your big-ticket purchases and expenses. Get loan up to Rs. 31.5 crore and meet your financial needs.

    • Repayment plans

      Subject to the remaining lease period of the property in question, you can get a loan tenure that does not interrupt for your future or deplete your savings and repay conveniently up to 180 months.

    • Flexi loan facility

      Pay interest only on the funds utilised from the sanctioned loan amount using the loan facility.

    • Foreclosure benefits

      If all borrowers and co-borrowers are individuals, loan availed on floating interest rates, and loan taken for purposes other than business use, then there will be no foreclosure/ part-prepayment charges.
      However, apart from above situation part prepayment charges are applicable for term Loan up to 4.72% (inclusive of applicable taxes) of the principal amount of loan prepaid on the date of such part-prepayment.
      Part pre-payment charges are not applicable for Flexi Term Loan (Flexi Dropline) and Hybrid Flexi.

    • Eligibility criteria and documents required

      Anyone can apply as long as they meet the criteria mentioned below.

    • Eligibility criteria

      1. Nationality:

        You must be an Indian citizen residing in India. Minimum age: An individual applicant/co-applicant must be minimum 25 years or *18 years for non-financial applicant (property owner).

      2. Maximum age:

        85 years at loan maturity of individual applicant/co-applicant including non-financial applicant (property owner). *Higher age of co applicant may be considered up to 95 years basis 2nd generation (legal heir) meeting age norms and taken as a co-applicant on the loan structure. Occupation: Self-employed non-professionals, self-employed professionals and salaried customers having rental income.

      3. Key Features, Benefits and Risks of LRD for Borrowers and Banks

        If you are a lessor, understanding the key features of the lease rental discounting loan is essential. Let's consider both the benefits and risks associated with the LRD loan.

  • Benefits for Borrowers Seeking LRD:

    1. Improved Liquidity:

      You can unlock the financial potential of your leased property. It helps in meeting any immediate financial requirements without liquidating the property.

    2. Flexible Repayment:

      Loan repayments are matched with the lease period, thus providing you with a comfortable repayment schedule.

  • Advantages for Banks Offering LRD Loans:

    1. Secure Investment:

      The bank holds the leased property as collateral, minimising the risk involved.

    2. Potential for Long-Term Profit:

      The bank can accrue significant profits from the interest charged on the LRD loan over a long period.

  • While the LRD brings several advantages, it's important to understand the potential risks and how to mitigate them:

    1. Borrower Default Risk:

      Ensure a reliable lessee who can consistently pay the rent, reducing the default risk.

    2. Interest Rate Fluctuation:

      Fixed interest rates can safeguard you from potential market fluctuations.