Citibank India plans to introduce Rental Rental Discount (LRD) for leading commercial real estate companies in India, as it aims to strengthen the focus on institutions while moving away from retail, ET two told. people familiar with the matter.

LRD is a popular rental credit instrument around the world. This will likely ease the fund crisis in the real estate sector, which has been hit hard by the pandemic.

The bank will set up a separate team and infrastructure for this line of service. Citibank did not respond to ET’s request.

“The average length of occupancy of the LRD can be in the order of 5 to 7 years,” said one of the people cited above.

LRD remains a key focus area for Citigroup globally. However, that is not in the product pot for India. With the Indian company in the midst of an overhaul, this may well give Citi’s growing institutional approach a boost.

It is estimated that the contribution of the real estate sector to India’s (GDP) will increase to around 13% by 2028. Developers are struggling to find financing at a reasonable rate. Structured products like LRD are likely to provide liquidity for the industry in the future. Banks are traditionally risk averse when granting loans to builders.

Many people own commercial spaces and offer them for rent. ICICI Bank, the country’s largest private lender by asset size, offers LRD loans at interest rates starting at 8.85% per annum. In addition, non-bank financial companies like Bajaj Finserv also offer LRD credits.

Net rental of commercial office space across the country is likely to increase 12-18% to 25-30 million square feet (m²) in the next fiscal year, building on a weak base in the current fiscal year, a gradual return of tenants to offices and an improving macroeconomic situation, Crisil said in a report earlier in the year.

In India, LRD is typically used by developers and owners of office and retail real estate projects. Of these, the malls alone have benefited from more than 70,000 crore in funding through this route across the country. This funding model is expected to continue to grow as it is an attractive option for project owners to support their high investment needs at relatively lower costs using their existing cash flow and tangible assets. guaranteed.