SBI Lease Rental Discounting

State Bank of India (SBI), one of the largest public sector banks, offers a lease rental discounting (LRD) term loan scheme for property owners. This scheme provides loans against the rental receipts obtained from lease contracts with corporate tenants. By examining long-term cash flow, the bank extends loans based on the assured rental amount. In this article, we explore the SBI lease rental discounting scheme in detail.

Understanding Lease Rental Discounting (LRD)

Lease Rental Discounting (LRD) loans operate on the premise that rental properties generate a stable rental income. Property owners can use rental receipts from lease agreements as collateral security when applying for a loan. This facilitates leveraging fixed rental income to meet financial needs or invest in further properties.

Advantages of Obtaining LRD

The benefits of acquiring a lease rental discounting loan are numerous:

Business Expansion: Property owners can use the obtained loan to invest in additional properties, thereby expanding their portfolio further. Discover More About Loans for Expansion.
Tax Benefits: Owners may avail tax deductions by holding additional properties.
Balanced Cash Flow: Borrowers benefit from a steady cash flow through rental income, while the loan bolsters revenue through strategic investments.
Low Capital Expenditure: Capital from the bank helps reduce personal expenditure incurred during property or business investments.

Eligibility Criteria

Eligible applicants for SBI's LRD loans include owners of residential and commercial buildings rented or to be rented to specific entities:

MNCs
Banks
Large and Medium-sized Corporates
Government Offices (Central and State)
Public bodies, including Municipal Corporations

Note: Properties leased to social infrastructure projects like colleges, schools, orphanages, hospitals, nursing homes, etc., are not eligible.

Target Group

Targeted beneficiaries include MSME units alongside individual owners of residential and commercial properties leased for rental income. Learn More About MSME Support.

Quantum of Loan

The loan amount available under lease rental discounting varies:

Minimum Loan: Loans start from Rs. 10 Lakhs.
Maximum Loan: Up to Rs. 50 crores for the National banking group and Rs. 500 crores for the Mortgage Guarantee company. Understand More About High-Value Loans.

Scale of Finance

The scale of finance for lease rental discounting is structured as follows:

Up to Rs. 10 Lakhs: 95% of the Present Value of total rent receivables according to the Marginal Cost of Funds-based Lending Rate (MCLR), or 70% of the realisable property value.
Up to Rs. 50 Crore: 70% of rent receivable for the lease term including renewal period or loan tenure, whichever is less.
Above Rs. 50 Crore: 75% of rent receivable, considering either the lease term or the loan tenure.

Pricing Details

SBI offers competitive interest rates linked to the MCLR (Marginal Cost of Funds-based Lending Rate). Explore More Interested Rate Details.

Collateral Security

Properties against which loans are sanctioned or other properties of similar value are required as collateral security. Additionally, the property value should be at least 143% of the loan amount. Learn About Collateral Requirements.

Repayment of Loan

Loans must be repaid through EMI. Borrowers should open an escrow account with SBI for the credit of rentals. Understand More About Loan Repayment Plans.

Processing Fee

SBI charges a processing fee that usually amounts to 1% of the loan value, with exact details provided upon loan application. Inquire About Processing Fee Details.

Terms and Conditions

Loan disbursement follows these essential conditions:

Noting of Equitable Mortgage (EM) where applicable; in cases where EM is not possible, a registered mortgage is required.
Execution and registration of the lease deed.
Standing instructions for transferring EMI from the escrow account to the term loan account.

Documents Required

The necessary documents for processing an LRD loan include:

Address Proof (Electricity Bill, Maintenance Charges Receipt, etc.)
Identity Proof (PAN Card, Voter’s Card, etc.)
Business Proof (MIDC Agreement, Shop and Establishment Act certificate, etc.)
Company Profile
Partnership deed in case of partnerships
Company Incorporation Certificate
Last 3 years' Trading and Balance Sheets (signed by a Chartered Accountant)
Last 1-year Bank statement of the firm
Track record if existing loans are reflected in the balance sheet
Firm/Company’s PAN Cards
Income Tax Returns for the past 3 years
Shareholding pattern certified by a Chartered Accountant
Copy of the registered rent agreement

Application Procedure for SBI Lease Rental Discounting

Eligible applicants must approach the nearest SBI branch to collect and fill out an application form, attaching all required documents. After finalization, the form should be submitted to the appropriate bank authority. Visit Here to Know More About the Application Procedure.

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Frequently Asked Questions

Common questions about Lease Rental Discounting Loans by SBI.

Lease Rental Discounting (LRD) is a term loan scheme offered by SBI to property owners against the rental receipts obtained from lease contracts with corporate tenants. The bank evaluates the long-term cash flow and provides the loan based on the rental amount.

The owners of residential buildings and commercial properties that are rented or to be rented to MNCs, banks, large and medium-sized corporates, government offices (central and state), and public bodies like municipal corporations are eligible for the LRD loan. However, it is not applicable for properties leased to social infrastructure projects like colleges, schools, hospitals, etc.

Some advantages include business expansion opportunities, tax benefits, balanced cash outflow, and low capital expenditure. The loan allows property owners to invest further in properties and utilize tax deductions for holding more properties.

The minimum loan amount is above Rs. 10 lakhs, while the maximum loan amount is up to Rs. 50 crores for the National Banking Group and Rs. 500 crores for Mortgage Guarantee companies.

For loans up to Rs. 10 lakhs, the scale of finance is 95% of the total Present Value (NPV) of total rent receivables or 70% of the realisable value of the mortgaged property. For loans above Rs. 50 crores, it is 75% of the total rent receivable for the residual lease term or loan tenor, whichever is less.

An equitable mortgage (EM) on the property against which the loan is being sanctioned or any other property of similar value has to be provided as collateral security. The realisable value of the mortgaged property should be at least 143% of the loan amount.

The LRD loan is repaid through Equated Monthly Installments (EMI). An escrow account has to be opened with SBI for crediting the rentals against which the loan is sanctioned.

The required documents include address and identity proofs, business proofs, title deeds, financial statements, income tax returns, bank statements, and the registered rent agreement copy, among others.

The interest rate for LRD loans is competitive and linked to the Marginal Cost of Funds based Lending Rate (MCLR) of SBI.

The eligible applicant needs to approach the nearest SBI branch, collect the application form, complete it with the required details and documents, and submit it to the bank for processing.