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Under LRD, the borrower pledges the future rental earnings in the form of receipts from the leased property to the bank for loan repayment. In the above process, the borrower gets the loan for the leased property, the tenant or the lessee is paying the repayment to the bank in the form of the installments till the time he holds the leased property. The type of property must be a commercial one in case you consider taking this type of loan.
LRD is particularly beneficial for the builders/ developers who make a huge investment in raising a commercial property for rent/ lease purposes. The amount invested by the builders is in a way locked as the returns are received only in the form of rentals. Thus, they decide to go for LRD from banks by pledging their future rentals from the property.
Lease Rental discounting is a wise method of generating funds utilizing your pre-owned property not only ensuring you security of your asset but also helps you to invest further according to your plan.
The various factors that a bank takes into account while offering LRD are:
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