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Real Estate Dictionary: Know what the jargons mean - Part 2

Here is the second list of some technical words oft-used in real estate and what they mean.

You may have heard of these real estate jargons and often wondered what they actually mean. Here is a list of such technical words oft-used in real estate and what they mean. This is the second part of the series.

Infrastructure status: Grant of ‘infrastructure status’ to a sector leads to entitlement of various benefits and concessions, enabling the sector to get long-term credit at competitive rates. The Reserve Bank of India categorizes infrastructure lending for industry categories such as transport, energy, water and sanitation, communication and social and commercial infrastructure. Infrastructure status enhances the avenues to raise money from lenders such as insurance companies and pension funds on easier terms. It also provides easier norms for lending under the ‘priority sector’ for certain sectors such as housing, social infrastructure and small and medium enterprises. Falling under this category also helps the sector get access to cheaper foreign currency funding through the external commercial borrowing route. Within Indian real estate sector, affordable housing and the logistics sector (industrial parks, warehouses, cold storages) have been accorded infrastructure status.

Lease Rental Discounting (LRD): Lease Rental Discounting is a secured term loan offered by a bank or financial institution to a commercial property owner with rental receipts from lease contracts as collateral. The loan is provided to the lessor basis the discounted present value of rentals as well as the underlying property value. Typically, a bank or financial institution gives a loan of 70 – 80% of the property value which is also referred as the Loan to Value Ratio. The rent for the property is transferred directly to the lending institution as EMI instead of being paid to the owner. The security of the payment is derived from the lease rent while taking into account factors including the lease tenure, expiry of the lease.

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