What is Lease Rental Discounting (LRD)?
Many individuals own commercial properties and lease them out. Leasing these spaces offers several benefits, one of which is the ability to raise a Term Loan based on the rental income generated. Lease Rental Discounting (LRD) is a type of Term Loan secured against income-producing commercial properties. The LRD loan operates on the principle that the leased property generates a steady rental income, which can be used as collateral to quickly secure funds.
How does Lease Rental Discount (LRD) work?
Lease Rental Discounting (LRD) are based on the concept of rental properties generating fixed rental income. Tenants enter into lease agreements with property owners, committing to regular rent payments. Property owners can use the rent receipts from these leases as collateral when applying for a loan.
The process is simplified because the rent payments are directly transferred to the bank as EMI, rather than to the property owner. Each bank has specific criteria for determining the loan amount against the property, but typically, borrowers can secure up to 70% of the property's market value in loan funds.
Features and benefits of lease rental discounting
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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.
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Comfortable 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.
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Flexi loan facility
Pay interest only on the funds utilised from the sanctioned loan amount using the Bajaj Finserv Flexi loan facility.
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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-payment charges.. However, apart from above situation part pre-payment 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.
You can opt for an interest rate linked to the Bajaj Floating Reference Rate (BFRR). This offers a transparent interest rate process and allows you to benefit from favourable market conditions, as the BFRR is periodically reviewed and approved by internal committees. Any existing loan agreements held by Bajaj Finance customers linked to external benchmarks will remain unaffected.
Lease rental discounting (LRD) is a term loan offered against rental receipts. You can opt for LRD when you own a property that gives you fixed rental income at regular intervals. The amount you can borrow is based on the discounted market price of rentals and the value of the property.
Avail an LRD and enjoy multiple benefits such as high-value financing, easy application, quick disbursal, and more. You can use the loan for any purpose or invest the sum to gain attractive returns.
Eligibility criteria and documents required
Anyone can apply as long as they meet the criteria mentioned below.
Eligibility criteria for lease rental discount
- 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).
- 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.
Note: This is an indicative list that may change based on your actual loan application.
Documents required for lease rental discount
- ID proof
- IT returns and balance sheet
- Bank account statement of the last 6 months
- Lease agreement paper
- Application form
- Photograph
How to apply for lease rental discounting
The process for an LDR application is extremely easy to follow:
- 1 Visit our official site and click on the Apply Online option.
- 2 Fill in the application form with the required details.
- 3 Offer the required documentation.
Our representatives will be in touch with you within the next 24 hours* to guide you on the next steps so you can get the money in your bank account.
Lease rental discounting for fees and charges
| Type of fee | Applicable charges |
| Rate of interest (floating) | 9% to 12% per annum |
| Processing fees | Up to 3.54% of the loan amount (inclusive of applicable taxes) |
| Documentation charges | Up to Rs. 2,360/- (inclusive of applicable taxes) |
| Flexi Facility Charge | Term Loan: Not applicable Flexi variant (as applicable below) - (Inclusive of applicable taxes): Flexi Term Loan (Flexi dropline):
Flexi Hybrid Loan:
Will be deducted upfront from loan amount. *Loan amount includes approved loan amount, insurance premium, VAS charges, and documentation charges. |
| Pre-payment charges | Full pre-payment/Foreclosure · Term Loan: Up to 4.72% (inclusive of applicable taxes) on the outstanding loan amount as on the date of full pre-payment. · Flexi Term Loan (Flexi Dropline): Up to 4.72% (inclusive of applicable taxes) of the total withdrawable amount as per the repayment schedule as on the date of full prepayment. · Flexi Hybrid Loan: Not applicable Part pre-payment · Up to 4.72% (inclusive of applicable taxes) of the principal amount of loan prepaid on the date of such part pre-payment. · Flexi Term Loan (Flexi Dropline): Not applicable Note: If all borrowers and co-borrowers are Individual, loan availed on floating interest rates, and loan taken for purpose other than business use, then there will be no foreclosure/part-payment charges. |
| Annual maintenance charges | Term Loan: Not applicable Flexi Term Loan (Flexi Dropline): Not applicable Flexi Hybrid Loan: Not applicable |
| Bounce charges | Rs. 1,500/- per bounce/- per bounce. “Bounce charges” shall mean charges for (i) dishonour of any payment instrument; or (ii) non-payment of instalment (s) on their respective due dates due to dishonour of payment mandate or non-registration of the payment mandate or any other reason |
| Legal charges | Recovery of charges |
| Repossession and incidental charges | Recovery of charges |
| Penal Charge | Penal Charge is applicable in the following scenarios: a. Penal Charge: Any payment default shall attract penal charge of Rs. 190 per day for period of such delay from the respective due date and continue to apply until the date of receipt of amounts under the said default. b. Covenant Perfection Charge: i) Rs. 800/- per day for non-submission of critical documents after 90 days of disbursement. Levy from the date when due on non-compliance of any one or all heads in the category. ii) Rs. 500/- per day for non-submission of non-critical documents after 120 days of disbursement. Levy from the date when due. |
| Stamp duty (as per respective state) | Payable as per state laws |
| Broken period interest/ pre-EMI interest | Method of recovery of "Broken Period Interest/Pre monthly instalment Interest" would be as follows: Scenario 1: If Loan is disbursed on 1st or post 10th of the month: For Term Loan: BPI amount will be capitalised, i.e added to Principal amount on due date / deducted from disbursement For Quick disbursal process: BPI amount will be capitalised, i.e added to Principal amount on due date / added to first instalment Scenario 2: If Loan is disbursed between 3rd and 10th of the month: |
| Mortgage origination fees | Up to Rs. 6,000/- (inclusive of applicable taxes) per property charged upfront. Note - In case of re-valuation of the property then MOF will be levied again and shall be deducted from loan disbursement amount. |
| Conversion fee (floating to fixed)** | For Term Loan: Up to 1.18% (inclusive of applicable taxes) of principal outstanding + undisbursed amount (if any) For Flexi Term Loan and Hybrid Flexi Loan: Up to 1.18% (inclusive of applicable taxes) on flexi limit + undisbursed amount (if any) Note: a) The company would charge additional interest rate risk premium of 200 bps over the applicable rate of interest on the borrower's loan account as on that date. |
| Conversion fee (fixed to floating)** | For Term Loan: Up to 1.18% (inclusive of applicable taxes) of principal outstanding + undisbursed amount (if any) For Flexi Term Loan and Hybrid Flexi Loan: Up to 1.18% (inclusive of applicable taxes) on flexi limit + undisbursed amount (if any) Note: Three conversions are permissible throughout the entire tenure. |
| Switch fee for ROI change | Up to 2.36% (inclusive of applicable taxes) of principal outstanding |
| Commitment fee | Maximum up to total PF amount. |
| Principal Holiday Facility fee | Principal Holiday (as applicable below) -
Note: The above principal holiday facility fees will be deducted upfront from loan amount. Loan amount includes approved loan amount, insurance premium, VAS charges and documentation charges. |
Purpose of lease rental discounting
- Access immediate funds: LRD allows property owners to unlock the value of their leased commercial spaces by using rental income as collateral for a loan.
- Invest in new opportunities: The loan proceeds can be reinvested in new properties or business ventures, supporting expansion and growth.
- Improve liquidity: It provides a quick infusion of capital without selling the property, enhancing liquidity.
- Secure cash flow: Rental payments directly cover the loan EMIs, ensuring a stable and predictable cash flow.
- Reduce personal financial burden: Funds from the loan can be used to finance personal investments or property acquisitions.
**The option of switching from floating to fixed rate of interest and vice versa would be applicable only to Borrowers whose loan qualify as personal loan as per RBI circular on Reset of Floating Interest Rate on Equated Monthly Instalments (EMI) based Personal Loans- RBI/2023-24/55-DOR.MCS.REC.32/01.01.003/2023-24.
Personal loans refers to loans given to individuals and consist of (a) consumer credit, (b) education loan, (c) loans given for creation/ enhancement of immovable assets (e.g., housing, etc.), and (d) loans given for investment in financial assets (shares, debentures, etc.).
Further, Consumer credit refers to the loans given to individuals, which consists of (a) loans for consumer durables, (b) credit card receivables, (c) auto loans (other than loans for commercial use), (d) personal loans secured by gold, gold jewellery, immovable property, fixed deposits (including FCNR(B)), shares and bonds, etc., (other than for business / commercial purposes), (e) personal loans to professionals (excluding loans for business purposes), and (f) loans given for other consumptions purposes (e.g., social ceremonies, etc.). However, it excludes (a) education loans, (b) loans given for creation/ enhancement of immovable assets (e.g., housing, etc.), (c) loans given for investment in financial assets (shares, debentures, etc.), and (d) consumption loans given to farmers under KCC. For risk weighting purposes under the Capital Adequacy Framework, the extant regulatory guidelines will be applicable. (as defined in XBRL Returns – Harmonization of Banking Statistics-RBI/2017-18/117-DBR.No.BP.BC.99/08.13.100/2017-18)
Lease rental discounting FAQs
Yes, you can prepay an LRD loan. However, it depends on the lender's terms and conditions. Prepayment may reduce the outstanding loan amount, thereby lowering interest payments.
Prepayment charges vary by lender. Some banks impose a fee for early repayment, while others may offer prepayment without charges. It's essential to confirm the terms with your bank before proceeding.
Yes, property owners may be eligible for tax deductions on the interest paid on an LRD loan under Section 24(b) of the Income Tax Act, which relates to home loans and property financing.
Yes, you can refinance your home loan to lower the LRD if the property value has appreciated. Refinancing may offer better loan terms or reduced interest rates.
LRD is typically calculated based on the property's rental income. The loan amount is generally up to 70% of the property’s market value or 100% of the annual rental income.
LRD provides financial institutions with a secured loan option backed by rental income. It helps diversify their portfolio, while offering property owners access to immediate funds without selling their assets.
