LRD as the name reveals is one of the loans offered by banks under which an applicant avails loan against his/her leased or rental property. Under this loan borrower pledges the future receivables under specified escrow arrangement where the rent is directly deposited with the lender and not with the borrower. LRD is typically offered against commercial or industrial properties. Under the scheme lenders usually prefer the rental receivables from renowned corporate where the lease agreement is executed for a definite tenure. Lenders also ensure that the future rental earnings from the property are secured before offering LRD. To avail this loan the property should be occupied by the Lessee as in Loan against Property.
The borrower is sanctioned the loan based upon the rent to be collected over the period of lease. This product is tailored for people having significant rental income. The tenure of such loans is much shorter than other property based loans and usually linked to the amount of time remaining for the lease on property to expire. Most institutions provide Loans upto 90% of the value of remaining lease, provided the borrower can convince the lender and exhibit the ability to pay the installment for such a loan. LRD enables you to encash your current rental cash flows and Funds can be used for expansion of business, consolidation of obligations and / or business capital requirements.