Last updated 12 Nov 2026
Lease rental discounting (LRD) is a loan against rent you will receive in future from a tenant under a lease. The lender advances money now, and the rent is routed to the lender and used to repay the loan. It suits owners of commercial property let to reliable tenants under a registered lease, such as offices, retail space or warehouses. The property and the lease together are the security.
The loan amount depends on the rent, the lease's remaining term, the tenant's strength and the property's value, not on your personal income alone. Terms differ widely, so treat this guide as a framework and confirm structures with each lender. Pricing is set by each lender; see the interest rates page. The product page is lease rental discounting.
How it works
- You own a property that is leased to a tenant under a lease agreement, usually registered, with a stated rent and period.
- The lender values the property and checks the lease, the tenant and the rent history.
- The lender sanctions a loan sized against the rent receivable over the lease period, and against the property value.
- The tenant is asked to pay rent into an account controlled by the lender, called an escrow or designated account.
- The lender takes its EMI from that account, and the balance of the rent, if any, comes to you.
- The loan is closed over a tenor that does not run beyond the lease period in most structures; ask your lender.
A worked example
The owner of an office floor leases it to a company for a monthly rent of ₹4,00,000 under a nine-year lease. The lender values the floor and checks that rent has been paid on time. Suppose the lender is willing to lend an amount whose monthly EMI is covered by the rent with a margin, say an EMI of ₹3,00,000 against the rent of ₹4,00,000. The rent is paid into the designated account, the EMI is taken, and ₹1,00,000 reaches the owner. The coverage ratio and the loan size are decided by the lender; the figures are illustrative. If the tenant leaves or defaults on rent, the owner must still pay the EMI, so check what happens in that case.
What lenders look at
Factors in an LRD decision
| Factor | What the lender checks | Why it matters |
|---|---|---|
| The lease | Registered lease, term remaining, lock-in, rent, escalation | Rent is the source of repayment |
| The tenant | Business strength, payment record, financials | A strong tenant lowers the risk |
| The property | Title, valuation, location, approvals | Security if rent fails |
| Rent coverage | How many times rent covers the EMI | Margin for a bad month |
| The owner | Credit record, other income and obligations | Your ability to pay if rent stops |
| Lease vs loan period | Loan tenor within the lease term | Rent should not end before the loan does |
Documents usually asked for
Documents
| Document | Why it is asked |
|---|---|
| KYC of the owner and the entity | Identity and existence |
| Title documents, sale deed, and the chain of ownership | To confirm the owner can mortgage the property |
| Registered lease agreement and addenda | The rent and its terms |
| Rent receipts and bank statements showing rent received | Payment history |
| Tenant's KYC and recent financials | Strength of the tenant |
| Property tax receipts, approvals, occupancy certificate | Legal compliance of the property |
| ITR and bank statements of the owner | Overall repayment capacity |
| Property valuation and legal report | Done by the lender's valuers and lawyers |
See sale deed, title deed, encumbrance certificate and occupancy certificate.
LRD compared with other rent-linked and property loans
Comparison
| Option | Based on | Good when | Watch out for |
|---|---|---|---|
| Lease rental discounting | Rent under a lease plus property | Commercial property let to a strong tenant | Dependence on the tenant |
| Loan against rent (commercial) | Rent from commercial property | Smaller owners with rent receipts | Terms vary; see the product page |
| Loan against rent (residential) | Rent from residential property | Owners of let residential property | Lower rent volumes |
| Loan against commercial property | Property value | Rent is not the main driver | Repayment from your own income |
| Business loan | Business cash flow | You need money for the business | Not tied to the property |
See commercial rental loan, residential rental loan, loan against commercial property and the loan against rent pillar.
Risks to weigh
- Tenant default or exit. If the tenant stops paying or leaves, the EMI is still yours.
- Lease expiry. A loan that outlasts the lease depends on renewal.
- Vacancy between tenants.
- Rent revisions that fall short of what was assumed.
- Property title or approval problems that surface at legal checks.
- The lender's right to take the property if repayment fails. See the mortgage laws guide and SARFAESI Act.
Charges lenders apply
Processing fee, valuation and legal charges and other lender fees are set by the lender; stamp duty on the mortgage and registration are set by the state. RBI limits prepayment charges on many floating-rate loans (for loans sanctioned or renewed from 1 January 2026, including business loans to individuals and micro and small enterprises, with limits by lender type), so check the Key Fact Statement for any prepayment or foreclosure charge. Ask for the Key Fact Statement and compare offers on the APR. See Key Fact Statement and APR.
Applying through LOANZ 360
LOANZ 360 is a loan aggregator, not a lender. It compares your details with each partner lender's published criteria before any application, and one advisor follows your file through the valuation, legal checks, sanction and disbursal. The lender decides, prices and pays out into your own bank account. Start with the enquiry form.
Frequently asked questions
Is lease rental discounting the same as a loan against property?
They are related, since both use property as security. In LRD the loan amount is sized against the rent under a lease, and the rent usually goes to the lender through a designated account. A loan against property is sized mainly on property value and your income.
Can I do LRD on residential property?
Some lenders offer rent-based loans on residential property, but LRD in the strict sense is mostly for commercial property let to a business tenant. Check the product pages for residential and commercial rent-based loans.
What happens if my tenant leaves?
The EMI is still due. You must find a new tenant, use your other income or ask the lender what options exist. This is the main risk of LRD, so check the tenant's lock-in period and your reserves.
Does the lease have to be registered?
Lenders generally want a registered lease for comfort on enforceability. Stamp duty and registration rules are state matters. Ask your lender and a lawyer about your lease.
How long can the loan tenor be?
Lenders usually keep the tenor within the remaining lease term, but terms differ. Ask each lender how it treats a lease that is shorter than the loan you want.
Who gets the rent?
Under the usual structure the tenant pays into a designated account. The lender takes the EMI and the balance goes to you. Confirm the account arrangement and the timing in writing.
Related reading: Mortgage laws in India, Builder and construction finance, Key Fact Statement and APR, Loan documents and KYC, Lease rental discounting, Loan against rent, Commercial rental loan, Sale deed, EMI calculator.