DSCR Calculator

Most commercial lenders require minimum DSCR of 1.20 to 1.25. Above 1.5 is excellent and may qualify for lower rates.

Increase NOI (raise revenue/cut expenses), reduce debt, or refinance to lower payments. Even 5% NOI improvement meaningfully impacts DSCR.

DSCR is for business and commercial real estate. For personal loans, lenders use debt-to-income (DTI) ratio instead.

DSCR measures a property or business's ability to cover its debt payments using its net operating income, making it a property-level or business-level metric. DTI measures an individual's total monthly debt payments against their gross monthly income, making it a personal-level metric. DSCR is used for commercial real estate and business loans, while DTI is used for personal loans, mortgages, and credit cards.

Most lenders require a minimum DSCR of 1.20 to 1.25 for rental property loans, meaning the property generates 20-25% more income than needed to cover the debt payments. A DSCR of 1.50 or higher is considered excellent and may qualify you for better interest rates. For your own analysis, targeting a DSCR of at least 1.30 provides a comfortable cushion for vacancy periods and maintenance expenses.

To calculate DSCR for a rental property in India, divide the Net Operating Income (NOI) by the Total Debt Service. NOI is the annual rental income minus operating expenses like property taxes, maintenance, insurance, and property management fees. For example, if a property generates 6,00,000 in annual rent with 1,00,000 in expenses, the NOI is 5,00,000. If the annual loan payment (principal and interest) is 3,80,000, the DSCR is 5,00,000 divided by 3,80,000, which equals 1.31, considered acceptable by most Indian lenders.

Indian banks and financial institutions typically require a minimum DSCR of 1.20 to 1.50 for commercial property loans, depending on the property type and loan size. Most public sector banks set the threshold at 1.25, while NBFCs may accept 1.20 for well-located properties. For riskier property types like hotels or restaurants, lenders may require a DSCR of 1.50 or higher. A DSCR consistently above 1.25 also helps you negotiate better interest rates and may allow you to access higher loan amounts.

To improve your DSCR, focus on two levers: increasing your Net Operating Income or reducing your debt service. Increase NOI by raising prices, cutting unnecessary expenses, improving operational efficiency, or adding revenue streams. Reduce debt service by negotiating lower interest rates, extending loan tenures, or paying off existing high-cost debts. Even modest improvements matter: increasing NOI by 10% on a property with a DSCR of 1.15 would raise it to approximately 1.27, potentially moving it from borderline to acceptable territory for most Indian lenders.

For MSME (Micro, Small and Medium Enterprises) loans in India, most banks and NBFCs look for a DSCR of at least 1.25 for manufacturing enterprises and 1.20 for service enterprises. A DSCR above 1.50 is considered strong and may qualify you for preferential interest rates. For startups and newer businesses with less than 3 years of operations, lenders may accept a slightly lower DSCR of 1.15 if other parameters like promoter credit score and collateral are strong. Government-backed MSME loan schemes under MUDRA may have more flexible DSCR requirements.

DSCR requirements differ significantly between residential and commercial property loans. For residential rental properties, lenders typically require a DSCR of 1.10 to 1.25 because residential properties have lower vacancy risk and more stable demand. For commercial properties, the requirement is higher at 1.25 to 1.50 due to longer vacancy periods and higher tenant turnover risk. Commercial properties like retail spaces and offices also have higher maintenance costs and are more sensitive to economic cycles, which is why lenders demand a larger income cushion.