How Much Can You Borrow on LRD? (Calculation Explained)

The most common question an owner asks about LRD is “how much will I get?” — and the honest answer is that it’s set by two separate calculations, whichever is lower. Understand both, and you can see exactly where the drawable amount comes from, and how to push it up.

In short: An LRD loan is the lower of (a) the present value of your contracted future rentals, discounted at the lender’s rate over the lease tenor, and (b) a loan-to-value cap of roughly 60–75% of the property’s market value. A longer lease, a stronger tenant, built-in escalations and a competitive discount rate all increase the amount.

The two calculations

Calculation 1 — present value of the rentals. The lender takes your contracted monthly rent over the unexpired lease, and discounts it back to today’s value at its lending rate. The longer the lease and the higher the rent (and escalations), the larger this figure. This is the rental-capacity number.

Calculation 2 — the LTV cap. Separately, the lender caps the loan at a percentage of the property’s market value — typically 60–75%. This protects the lender if the tenant exits and the loan has to be repaid from a sale.

Your loan = the lower of the two. A high rent on a short lease may be capped by LTV; a long lease on a modestly-valued property may be capped by rentals. Knowing which one binds tells you where to focus.

A simplified illustration

Say a property earns ₹10 lakh/month rent on a 9-year unexpired lease, and the lender discounts at ~9.5%. The present value of that rental annuity works out to roughly ₹6–7 crore. If the property is worth ₹10 crore, the 70% LTV cap (₹7 crore) is close to the rental figure — so the lease is being used efficiently. If the property were worth only ₹8 crore, the LTV cap (₹5.6 crore) would bind, and you’d draw less than the rentals alone would support.

(Illustrative — our LRD page has an interactive calculator to model your own numbers.)

The levers that maximise your draw

• Lease tenor — a longer unexpired lease increases the present value. Renewing or extending before you borrow can lift the amount.
• Tenant credit — a stronger tenant supports a higher LTV and a lower discount rate (which raises the present value).
• Escalation clause — built-in rent increases raise the future cash flows being discounted.
• The discount rate — a keener rate (won through lender competition) increases the present value of the same rentals.
• Valuation — a well-supported valuation lifts the LTV cap.

Getting all of these working together is where advice pays for itself. We frame the lease, tenant and escrow to underwrite the largest facility, then run banks and NBFCs against each other — see lease rental discounting. For a leased warehouse, the asset-class nuances are covered on our warehouse LRD page; if you are weighing a leased vs owned asset, see commercial property loan.

Key takeaways

• LRD loan = lower of (present value of rentals) and (~60–75% LTV of property value).
• Identify which cap binds — rentals or LTV — to know where to focus.
• Longer lease, stronger tenant, escalations, keener rate and a solid valuation all increase the draw.
• Model your own numbers with the LRD calculator.

FAQ

How is an LRD loan amount calculated? It’s the lower of the present value of your contracted future rentals (discounted at the lender’s rate over the unexpired lease) and a loan-to-value cap of roughly 60–75% of the property’s market value. Whichever is lower sets your loan.

What LTV can I get on LRD? Typically 60–75% of the property’s market value, capped further by the present value of the rentals. A stronger tenant and a longer lease support the higher end of that range.

Does a longer lease mean a bigger LRD? Generally yes — a longer unexpired lease increases the present value of the rental stream the lender discounts, which can increase the loan (subject to the LTV cap). Renewing or extending the lease before borrowing can lift the amount.

How can I increase my LRD eligibility? Strengthen the lease tenor and escalation, evidence the tenant’s credit quality, secure a keen discount rate through lender competition, and support a strong valuation. See LRD eligibility & documents.