Reliance

Lease Rental Discouting


Lease Rental Discounting (LRD) is one of the loan schemes offered by banks under which an applicant obtains loan against his/her leased property. Under LRD, the borrower pledges the future rental earnings from the leased property to the bank for loan repayment. LRD is typically offered against commercial properties.

LRD is particularly beneficial for the builders/developers who make a huge INVESTMENT in raising a commercial property for rent/lease purposes.
• The INVESTMENTS of the builders are in a way locked as the returns are obtained only in the form of rentals. Thus, they opt for LRD from banks by pledging their future rentals from the property. Banks also ensure that the future rental earnings from the property are secured before offering LRD. The various factors that a bank keeps in mind while offering LRD are:
• Profile of the lessee.
• Credit worthiness of the lessee in terms of rent paying capacity.
• Location of the property with regards to factors such as growth prospects, presence of other industries, civic amenities, etc.
• One of the most important points that a bank keeps in mind is that in no way it should be facilitating the conversion of black MONEY into white through LRD.

The eligibility ofthe loan under LRD is calculated by taking 70-75% of the net rental income and dividing it by per lakh EM! of the tenure of left over years in the lease rent agreement. Banks normally open an Escrow account along with the applicant. The rental/lease income is credited into this account and EMIs are deducted pit of it.
• Loan up to 60% of market value of property
• Higher loan amount up to Rs. 22 Crores
• Loan tenor up to 12 years
• Attractive Interest Rates

What is Lease Rent Discounting (LRD)?

Lease Rental Discounting (LRD) is a term loan offered against rental receipts derived from lease contracts with corporate tenants. The loan is provided to the lesser based on the discounted value of the rentals and the underlying property value. Lease Rent Discounting Information It is another method to obtain finance from bank or other financial institute or 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 i.e. Lease or rent period or tenure. The agreement is between the borrower and lender and the major term of repayment is the rent which 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. List of Documents for LRD The borrower have to provide the following documents to the banks or the financial institute or lending institution while submitting the Lease Rent Discounting loan application. Certain documents may be demanded by the bank or the lending institutions in post sanction phase or on periodical basis. Address Proof of the Individual/Partners /Directors: 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 certificate. 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 loans are shown into the balance sheet, then sanctioning letter, repayment schedule and track record 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, and Directors 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 Registered rent agreement copy with borrower who owns the premises and tenant who has rented the said premises

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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.

Rental Lease
A lease whereby the lessee pays a certain amount of rent in exchange for use of a property; in exchange, the lessor agrees to providemaintenance and insurance for the property. It is also called a full-service lease.

Leasing property

A rental agreement is often called a lease, especially when real estate is rented. Real estate rentals are initiated by a rental application which is used to build the terms of the lease. In addition to the basics of a rental (who, what, when, how much), a real estate rental may go into much more detail on these and other issues. The real estate may be rented for housing, parking a vehicle(s), storage, business, agricultural, institutional, or government use, or other reasons.

• Who: The parties involved in the contract, the lessor (sometimes called the owner or landlord) and the lessee (sometimes called the renter or tenant) are identified in the contract. A housing lease may specify whether the renter is living alone, with family, children, room-mate, visitors. A rental may delineate the rights and obligations of each of these. For example, a "sub-let" to a stranger might not be permitted without permission of the landlord. This also applies to whether or not pets may be kept by the renter. On the other hand, the renter may also have specific rights against intrusions by the landlord (or other tenants), except under emergency circumstances. A renter is in possession of the property, and a landlord would be trespassing upon the renter's rights if entry is made without proper notice and authority (e.g., 24 hours' notice, daytime, knock first, except for emergency repairs, in case of fire, flood, etc.).

• What: Rented real estate may include all or part of almost any real property, such as an apartment, house, building, business office(s) or suite, land, farm, or merely an inside or outside space to park a vehicle, or store things. The premises rented may include not only specific rooms, but also access to other common areas such as off-street parking, basement or attic storage, laundry facility, pool, roof-deck, balconies, etc. The agreement may specify how and when these places may be used, and by whom. There may be detailed description of the current condition of the premises, for comparison with the condition at the time the premises are surrendered.

• When: the term of the rental may be for a night (e.g., a hotel room), weeks, months, or years. There may be statutory provisions requiring registration of any rental that could extend for more than a specified number of years (e.g., seven) in order to be enforceable against a new landlord.
A typical rental is either annual or month-to-month, and the amount of rent may be different for long-term renters (because of lower turnover costs). Leaving a long-term lease before its expiration could result in penalties, or even the cost of the entire agreed period (if the landlord is unable to find a suitable replacement tenant, after diligent pursuit). If a tenant stays beyond the end of a lease for a term of years (one or more), then the parties may agree that the lease will be automatically renewed, or it may simply convert to a tenancy at will (month-to-month) at the pro-rated monthly cost of the previous annual lease. If a tenant at will is given notice to quit the premises, and refuses to do so, the landlord then begins eviction proceedings. In many places it is completely illegal to change locks on doors, or remove personal belongings, let alone forcibly eject a person, without a court order of eviction. There may be strict rules of procedure, and stiff penalties (triple damages, plus attorneys' fees) for violations.

• How much: Rent may be payable monthly, annually, or in advance, or as otherwise agreed. A typical arrangement for tenancy at will is "first and last month's rent" plus asecurity deposit. The "last month's rent" is rent that has yet to be earned by the landlord.

1. Lease Rental Discounting
2. Lease Rental Discounting (LRD) is a term loan offered against rentalreceipts derived from lease contracts with corporate tenants. The loan is provided to the lessor based on the discounted value of the rentals and the underlying property value. The product is designed to finance the business needs of:
Lease Rental Discounting (LRD) is a term loan offered against rental receipts derived from lease contracts with corporate tenants. The loan is provided to the lessor based on the discounted value of the rentals and the underlying property value.LRD is typically offered against commercial property.
Rent receipts are payable by the tenant directly to an escrow account with the lending bank.Rental income is credited in this account and EMI is deducted of it.

The underlying tenanted property, which may be commercial property or quasi commercial property will be taken as collateral. No plot, self construction or under construction properties will be allowed.Bank also see that future rental from the property re secured .

Product features :-
• Max Loan tenure - Duration of lease left.
• Max Loan amount - 70 to 75% of net rental divided by per lakh emi of the tenure left , subject to 60% of market value .
• No income tax benefit .
• Loan foreclosure penalty - Means paying off the complete loan at one go.Most of the bank charges 2 to 3% of principal outstanding as penalty .
• part payment - Means paying some part of loan.Most banks don't charge any penalty
• Co-applicant - Most of the banks ask for co-applicant .Co-applicant in case of
• Individual - spouse,parents
• Director - spouse , parents , pvt ltd company , other directors .
• Partner - spouse , parents , partners .
• Co-owners of property need to be co-applicants in loan .

Loan process
3 documents are required for a loan to get disburse
1. Sanction letter: - Loan sanctioning is based on the financial documents,personal documents and past credit history of the borrower. Based on the information provided banks calculates the loan eligibility and decides on the loan amount.
Documents required for loan sanctionning are :-
Documents in case of salaried
Documents in case of sole proprietor (proprietorship)
Documents in case of partner (partnership)
Documents in case of director (private limited company)
2. Legal report: - In this complete chain of property documents , starting from allotment of the property till the last transaction , are required . Based on these documents legal report is made.
3. Technical report: - In this approved map by municipal authority is required and based on it physical verification of the property happens. Certain things are checked like area of property , usage of property(Residential or commercial) and based on it report is made .
If all the 3 documents are approved by the bank , disbursement documents are signed and cheaque is made in name of lesse .
This complete process takes 15 to 18 days , subject to complete documents are provided by the borrower .

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