Lease Rental Discounting (LRD) is more common in commercial real estate, but it can also impact residential investors who lease out properties long term. Under LRD, banks lend money against future rental income, offering property owners a financing avenue without liquidating assets.

Key Benefits and Risks:

• Cash Flow Leverage: Investors can unlock capital tied up in fully or partially rented homes, using EMIs covered by rental cash flows.
• Lower Interest Rates: Because rentals provide stable income, lenders may offer favorable rates compared to unsecured loans.
• Expansion Opportunity: Releasing funds via LRD helps acquire additional properties, fund renovations, or consolidate debt.
• Risk Mitigation: In residential segments, it can be riskier if tenants vacate unexpectedly or default on rent. This possibility requires contingency planning for EMIs.
• Valuation & Documentation: LRD depends on property value, tenancy agreements, and rental track record. Strong tenant profiles (e.g., MNC employees) enhance lender confidence.

Though not as pervasive in residential real estate as in commercial, LRD offers strategic financial flexibility for landlords with stable, long-term tenants.