LIC Housing Finance

Lease Rental Discounting


Purpose:
Financing the owner of commercial properties against future rent receivables for the unexpired period of lease specified in the lease agreement. The loan may be availed for any personal/business needs of the borrower however loan will not be considered for any speculative or illegal purposes.
There is no doubt that real estate holds the greatest attraction for UHNIs. Most investments happen in properties, say a pocket of land, commercial properties like readily available offices or industrial warehouses. UHNIs, say with a net worth ranging from Rs 25 crore to Rs 100 crore and even above, have been mandating wealth management firms or real estate advisors to pick grade 'A' pre-leased commercial properties. These pre-leased commercial properties provide fixed income. Here, the aim is to lease out to quality tenants, earn lease income over a 3-5 year period and subsequently exit with a moderate to high capital appreciation.
There are mainly two kinds of commercial properties. The first is the lease-hold, mainly offered by government institutions like MIDC; they are leased to the buyer generally for a period of 99 years, extendable further. You actually buy rights to use the property and not the property per se. In a way, you are buying a property without really owning it. You have limited rights on what to do with the property.
The second is free-hold property - you become the exclusive owner of the property as well as the land on which it is constructed. It gives more right and responsibility to the owner. In India, a majority of the pre-leased commercial transactions happen on free-hold basis.
Lease Rent Discount is another method to obtain finance from bank or other lending institutes. Lease Rent Discount (LRD) consideration is between the borrower who owns the premises, the tenant who has rented the said premises or taken on lease and the bank or financial institute or Corporate. The rent is considered as fixed income over a stipulated time ie. Lease or rent period or tenure. The agreement is between the borrower and lender and the major term of repayment is the rent is directly deposited with the lender and not with the borrower. The Borrower is sanctioned a loan based upon the rent to be collected over the period of lease.

LRD LEASE AGAINST FUNDING
LOAN AMT Min. Rs. 100,000 - Max.Rs. AS PER ELIGIBILITY
DIS-Loan to Property Cost as per LICHFL eligibility
Rate of interest Change as per company policy or RBI guide line
Loan Term lease of locking years- or Upto 15 Years for professional & 10 years for non-professional
Repayment Mode Equated Monthly Instalments (EMI) - Monthly Rest Basis
Processing fees as per scheme applicable [ once paid will not refunded ]
POA MANDETORARY AS PER FORMAT
Sanction letter Valid for 90 days
Title or Legal charge In built in the processing fees [ DOCUMENT AS PER LICHFL REQUREMENT ]
Valuation In built in the processing fees [VALUATION PURPOSE REQUREMENT APPROVED PLAN COPY+ AGREEME.NT COPY OR OC COPY AS PER VALUAER REQUREMENT]
MARGIN MONEY REFECTION ON BANK STATEMENT OWN CONTRUBUTION PAYMENT IS 40% INCLUDING STAMPDUTY & REGD OR ELIGIBILITY AS PER LEASE
Disbursement Valid for your property document require as per company term & condition otherwise processing fees once paid will not refunded
INSURANCE APPICABLE AP PER SANCTION AUTHORITY
Security 0.20% total loan amt [example 100000 loan equitable mortgage]
1. Equitable Mortgage of House/Flat OR Deposit of Title Deeds
Security Other franking as per loan scheme + notary
Intimation mortgage applicable
TDS 1% TDS PAY TO GOVT AGREEMENT VALUE 49,99,999/ ABOVE MUST PAY 1% TDS
List of document Demand finance company
SECURE FEES AS PER COMPANY POLICY IF APPICABLE
FORECLOSER CHARGES AS PER COMPANY POLICY IF APPICABLE
EMI BOUNCE CHARGE 750 RS
RATE OF INTREST OPTIONS FIX & FLOTING AS PER SCHME
PREPAYMENT CHARGE NIL
SANCTION LETTER READ IT CAREFULY
COMMITMENT charges AS PER COMPANY POLICY IF APPICABLE
Eligibility :
(1) Individuals /partnership firms/limited companies owning commercial properties
(2) Properties should have been leased out to PSUs/Central/state govt.,undertakings,banks,FINANCIAL institutions or reputed corporate.
(3) The lease agreement must be REGISTERED or rent receipt entries for a period of minimum past 6 months must be reflected in bank statements of the applicants
(4) Age of the property should not be more than 20 years

Security Required :
Registered/Equitable mortgage of Property
Demand Promissory note & MONEY receipt

Lease Rent : Documents
The borrower and/or the guarantors have to provide the following documents to the banks or the lending institutions while submitting the Lease Rent Discount Loan Application. Certain documents may be demanded by the bank or the lending institutions in post sanction phase or on periodical basis.
Address Proof : Latest Electricity/Telephone Bill or Receipt of Maintenance Charges or Valid Passport or Voter’s Identity Card or Purchase/Lease Deed/ Leave & License Agreement of Residence or Office Premises.
Identity Proof : Valid Passport, PAN Card, Voter’s Card, Any other photo identification issued by Government Agencies.
Business Proof : VAT/CST Registration No. or MIDC Agreement or SSI Permanent Registration Certificate or Warehouse Receipts or Shop & Establishment Act Certificate or Copy of Lease Agreement along with the latest Rent paid Receipt.
Business Profile on Company’s Letterhead.
Partnership deed in case of partnership firms.
Certificate of incorporation, Date of Commencement of Business and Memorandum of Title Deeds, Form 32 in for Addition or Deletion of Directors in case of companies.
Last three years Trading, Profit & Loss A/c. and Balance Sheets (duly signed by a Chartered Accountant wherever applicable).
Last one years’ Bank statement of the Firm.
If existing loan, then sanctioning letter and repayment schedule of the same.
Firm/Company’s PAN Cards.
Individual Income Tax Returns of the Individual/Partners/Directors for last three years.
Last one years’ Bank statement of Individuals, Partners, Directors.
SEBI formalities in case of listed companies.
Share Holding pattern of Directors duly certified by a Chartered Accountant.
List of the Existing Directors of the company from the Registrar of the Companies.
Written & approved confirmation of having No Legal Suit filed against any of the directors. If any such legal suit or proceedings are pending then the details of such legal suit or proceeding.

Lease Rent : Process
Personal interview /discussions is held with the customers by the bank’s officials.
Bank's Field Investigation team visits the business place/work place of the applicant.
(All the documents submitted are verified by the bank with the originals so as to ensure the authenticity of the same.)
Bank verifies the track record of the applicant with the common information sharing bureau (CIBIL).
In case of fresh projects the bank analyses the back ground of the applicant/firm/company and the Technical feasibility/financial viability of the project based on various parameters and also the existing market conditions.
Depending on the size of the project the file is put up for sanction to the appropriate level of authority.

SANCTION AND DISBURSEMENT :
On approval/sanction, the sanction letter, is issued specifying the terms and conditions for the disbursement of the loan. The acceptance to the terms of sanction is taken From the Applicant.
The processing charges as specified by the bank have to be paid to proceed further with the disbursement procedure.
The documentation procedure takes place viz.Legal opinion of various property documents and also the valuation reports.(Original Documents to title of the immovable assets are to be submitted)
All the necessary documents as specified by the legal dept., according to the terms of sanction of the loan of the bank are executed.
Disbursement of the loan takes place after the Legal Dept. Certifies the Correctness of execution documents.

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