Lease rental discounting calculator
Estimate how much a bank will lend against the rent from a leased property: the present value of the future rent, capped by the property's value. Rent in ₹ a month, loans in ₹ lakh.
Net eligibility
Net rent = Gross rent × (1 − TDS), rising each year by the escalation. NPV is worked out in three-year blocks using each block's average monthly net rent, discounted at the loan rate. Eligibility = the lower of NPV × % of NPV and Property value × maximum LTV, less any existing loan on the property.
This calculator is for learning. Banks apply their own policies, margins and benchmarks, so treat the result as a guide, not a credit decision.
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What lease rental discounting is
Lease rental discounting (LRD) is a term loan given against the future rent from a leased property, usually commercial property let to a company. The tenant often pays the rent straight into an escrow account with the lending bank, and the EMI is taken from it. Because repayment comes from rent, the loan depends on two things: how much rent there will be and what the property is worth.
How to use this calculator
- Enter the current monthly rent (before TDS), the yearly escalation in the lease deed and the TDS rate.
- Enter the loan tenure (normally within the remaining lease term) and the interest rate.
- Enter the lender's limits: the % of NPV it will lend and the maximum LTV.
- Enter the property value, any existing loan on it, the loan requested and other EMIs paid from the rent.
The formula
- Net rent = Gross rent × (1 − TDS), rising by the escalation each year
- NPV = present value of the net rent over the loan tenure, discounted at the loan rate. As in the Excel version, it is worked in three-year blocks using each block's average monthly net rent.
- Eligibility = the lower of NPV × % of NPV and Property value × maximum LTV, less the existing loan
Worked example
Rent of ₹5,00,000 a month, rising 5% a year, with 10% TDS. A 10-year loan at 9%, with 90% of NPV and a 50% LTV, on a property worth ₹600 lakh with an existing loan of ₹100 lakh:
- NPV of the net rent: ₹432.23 lakh, so eligibility on NPV is ₹389.01 lakh
- Eligibility on property value: 50% × 600 = ₹300 lakh (the lower, so it applies)
- Less the existing loan of ₹100 lakh: net eligibility ₹200 lakh
- EMI on ₹200 lakh: ₹2,53,352. Average net rent in years 1–3 is ₹4,72,875, leaving ₹1,69,523 a month after this EMI and ₹50,000 of other EMIs.
Frequently asked questions
What does a bank check in the lease? That it is registered, the remaining lock-in and lease period, the escalation clause, the tenant's standing and how rent is paid. A strong tenant and a long lock-in support a longer tenure.
Why is the loan tenure kept within the lease period? Beyond the lease, there is no assured rent to repay the loan. Some lenders allow a longer tenure if renewal is very likely, but on stricter terms.
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