Lease rental discounting loans: 5 types
What's the story
Lease rental discounting (LRD) loans are an integral part of the Indian real estate sector. These loans, which are secured against future rental income from leased properties, provide a unique financing option for property owners. With the Indian market evolving, several new LRD loan types have emerged, catering to different needs and preferences. Here are five such loan types that are gaining traction in India.
Residential LRD
Residential Property LRD Loans
Residential property LRD loans are secured against rental income from residential properties such as apartments or houses. These loans are ideal for homeowners who lease their properties and want to leverage this income for financing purposes. The loan amount is determined by the property's rental yield and can be used for various financial needs, including home renovations or personal expenses.
Commercial LRD
Commercial property LRD loans
Commercial property LRD loans are secured against the rental income of commercial spaces such as offices or retail stores. These loans cater to investors with commercial real estate portfolios looking to optimize their cash flow. The loan amount is based on the property's commercial lease agreements, making it a viable option for businesses seeking additional capital without selling assets.
Mixed-use LRD
Mixed-use property LRD loans
Mixed-use property LRD loans are secured against properties with both residential and commercial components. These versatile loans cater to property owners with mixed-use developments, allowing them to leverage combined rental incomes from both segments. This type of loan is particularly useful in urban areas where mixed-use developments are common, providing flexibility in financing options.
Short-term LRD
Short-term LRD loans
Short-term LRD loans provide quick access to funds by using future rental income as collateral for a brief period, usually one to three years. These loans are ideal for property owners who need immediate cash flow support but expect their financial situation to improve in the near future. The short-term nature ensures lower interest rates compared to long-term borrowing options.
Long-term LRD
Long-term LRD loans
Long-term LRD loans provide financing against future rental income for longer periods, typically between five to 20 years. These loans are ideal for those who want stable monthly payments over a long period, while leveraging their property's rental potential. Long-term LRDs provide predictability in budgeting and planning for property owners with steady lease agreements.