What is Lease Rental Discounting LRD ?
Lease Rental Discounting (LRD) is a term loan offered by financial institutions against rental income derived from leased properties. The full form of LRD is Lease Rental Discounting. This loan allows property owners—whether residential, commercial, or warehouse—to monetise future rent receivables by borrowing a lump sum against the discounted value of their rental cash flows.
If you own a leased property with a registered rental agreement in place, an LRD loan in India can be a powerful financial solution for both personal and professional needs.
Understanding How Lease Rental Discounting (LRD) Works
Lease Rental Discounting (LRD) is a loan facility that enables property owners to raise funds by utilising future rental income from leased commercial properties. LRD helps property owners unlock liquidity without selling the asset. Funds can be used for business expansion, working capital, or other financial needs.
• The loan is sanctioned based on:
- A long-term lease agreement with a tenant
- The property's rental yield
- Rent is directed into an escrow account to ensure timely loan repayment.
- Flexible repayment tenures are available, up to 25 years.
- Loan amounts typically range from a few lakhs to several crores
Lease Rental Discounting Benefits & Features ?
Lease Rental Discounting enables property owners to access immediate funds without selling their assets. The loan is secured against the rental income and property market value, making it a low-risk, high-value option.
Common Use Cases:
Key Features, Benefits and Risks of LRD for Borrowers
Collateral:
Residential, commercial, or warehouse property currently under lease.
Loan Amount:
Minimum ₹50 lakhs; maximum as per property valuation and bank norms.
Tenure:
Up to 15 years.
Lease Rental Discounting Interest Rate:
Competitive rates based on lease terms, credit profile, and market trends.
Top-up Facility:
Option to transfer existing loans with additional funding.
Quick Processing:
Streamlined documentation and faster disbursal.
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5 Things To Consider Before Taking A LAP
Visit the Official Website and navigate to the ‘Loan Against Property’ section.
Select LRD Loan Option under eligible loan types.
Fill Out Basic Details such as property information, lease terms, and personal credentials.
Upload Required Documents including the lease agreement and property title.
Wait for Verification and Approval. Post-verification, funds will be credited to your account upon successful approval.
Upload Required Documents including the lease agreement and property title.
Wait for Verification and Approval. Post-verification, funds will be credited to your account upon successful approval.
Things To Keep In Mind
ABCL has increased its Long-Term Reference Rate (LTRR) by 20 bps to 20.45% p.a. with effect from March 1, 2024. The interest rate on the floating rate loans of tenor greater than 12 months that are linked to the LTRR will be revised upwards by 20 bps. The spread / margin on the said loans will remain unchanged.
ABCL has increased its Short-Term Reference Rate (STRR) by 20 bps to 19.45% p.a. with effect from March 1, 2024. The interest rate on the floating rate loans of tenor up to 12 months that are linked to the STRR will be revised upwards by 20 bps. The spread / margin on the said loans will remain unchanged.
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FAQs on Loan Against Property
LRD allows banks and NBFCs to provide secured loans with lower default risk. The predictable rental income stream ensures better repayment reliability, making LRD a preferred asset class in property-backed lending.
LRD is calculated by discounting future rent receivables using a standard discounting rate. The ideal loan-to-value (LTV) ratio is typically 50–70% of the property’s market value, based on risk profile and lease terms.
LRD can be availed against leased residential, commercial, and warehouse properties, provided the lease is active, legally registered, and with a reputed corporate tenant.
If used for business purposes, the interest paid on LRD may be deductible as a business expense under Section 37(1) of the Income Tax Act. Always consult a tax advisor for personalized guidance.
Yes, most LRD loans come with prepayment and foreclosure options. Charges vary based on whether the loan is on a fixed or floating rate and if the borrower is an individual or entity. Please refer to the applicable Schedule of Charges for details.
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