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3 Ways in Which a Lease could be Terminated

In India, the landlord-tenant association is regarded as a jural relationship and is regulated by the provisions of the Transfer of Property Act, 1882 (Act). When it comes to a landlord/tenant connection, the parties are typically observed as a lessor (landlord) and lessee (tenant). The contract under which the landlord-tenant relationship is tied is a lease agreement. 

A real estate lease contract is a binding agreement between you and your landlord. Thus, if you feel the need to prematurely terminate your lease, there will be consequences – legally and financially. There are many reasons that can be used to end a lease, but the majority of them will not offer you legal relief from your landlord. 

Occasionally, after signing a rental agreement or lease, a tenant may feel the need to leave the rental unit prematurely for several reasons. In the same way, a landlord can terminate the lease under specific circumstances. It is vital to adhere to state laws, as well as specifications that are listed within the lease, for delivering notice of intent to end a lease. 

Usually, lease termination in India can happen for a variety of reasons and by both the parties – landlord and tenant 

Termination of Lease by Tenant 

Since a lease is bound by an agreement, tenants have to adhere to the length of the tenure specified. This means that they are accountable for paying the rent stated during the duration of the lease. There are exceptions to this rule, especially if the landlord breaks or violates the lease. 

If the landlord breaches the terms of the lease, particularly health and safety codes, the tenant may be able to leave without giving notice or providing less notice than needed. In case there is a natural disaster or significant impairment to the property, it prevents the tenant from continuing to stay in the rental unit. However, if the tenant violates a lease without a legally protected reason, the landlord is entitled to sue for damages.

Termination of Lease by Landlord 

A landlord is able to legally end a lease if the tenant violates the terms of the lease or has broken the law. The violation by the tenant needs to be significant like late rent or having a pet despite the rule stating ‘no pets allowed on the premises. Other violations of the law, like selling drugs on the premises also justify the landlord’s decision to terminate the lease. 

The landlord needs to first dispatch a termination notice to the tenant, thereby making it clear that the tenancy has ended. The tenant may be offered time to amend the violation, by paying outstanding rent, for instance. There will be a notice that declares that the tenant needs to move out of the premises or risk eviction. 

Issues Pertaining to Security Deposit 

Generally, the landlords have about two weeks to one month to give back the tenant’s security deposit amount after the lessee vacates the rental premises. Landlords may subtract from the tenant’s security deposit for legitimate reasons. Deductions need to be shown in a written document and itemized, and the payment needs to be refunded for any deposit balance. It is vital to check with the landlord if the deductions are not accurate. Any agreement reaches needs to be logged in writing. 

In a nutshell, there are many ways in which a termination of a lease agreement India can happen. If you wish to know the leasing status of many companies across the country, check out CRE Matrix and its many tools for it is the leading real estate data analytics company India.

For more such exciting analysis and details on real estate, visit CRE Matrix.

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How to Apply for Loan to Buy Commercial Property in India

Getting a loan for commercial office space is not the same as acquiring loans for a residential property. Several businesses seek to get a loan for office space but do not know how to go about it. Acquiring a loan for a home is more popular, better, and more extensively given by banks and financial institutions. On the other hand, acquiring a loan for commercial space is difficult and the know-how of people in this regard is also rather restricted. 

People tend to get overwhelmed when it comes to applying for loan for commercial property purchase India. Even if they are aware of the minute details of home loan application procedures, they seem to find funding office space or commercial units tough. Commercial real estate transactions can be either for office spaces or maybe even retail outlets like stores or shops. They could be ready to occupy or under construction. 

Banks tend to be extra wary in granting loans for commercial property purchases. They are overly cautious commercial spaces that are currently being constructed. So, it is recommended that prior to applying for a loan, always check with your bank about the financing criteria and other requirements. 

Here is a guide with all the details that investors need to keep in mind before applying for a loan for commercial property purchase. 

First, you need to be eligible for applying for commercial real estate loans. Eligible applicants comprise both salaried and self-employed professionals. The latter category contains doctors, architects, engineers, chartered accountants, and lawyers. Traders, entrepreneurs, and contractors can also be eligible to apply for loans in this category.

Here’s a checklist to qualify for applying for a loan for commercial purchase.

  • Make sure that the builder comes with a strong background and profile with a successful track record of delivery.
  • Check the Title Deed of the commercial purchase. Make sure that it meets all official regulations and civic approvals. 
  • Ensure that you have a fair valuation of the commercial space in mind while asking for a loan. 
  • You need to have a good financial standing with a decent credit score, adequate monthly income, and other credentials. 
  • The age of the property needs to be in adherence with the criteria of the bank. 
  • Your commercial property needs to meet the minimum space criteria of the bank. 
  • All technical specifications of the commercial property need to be in place, with complete approval from the Government and other concerned and relevant authorities. 

Once you have met the eligibility criteria, you can expect to get your loan approved with a reasonable interest rate. Loan for commercial property interest rates is generally up to 4-5% more than interest rates on residential properties, contingent upon the borrower’s credit history. 

You can take the help of CRE Matrix, a leading real estate data analytics company India that can give you all the insights on loans that are taken for commercial properties across the country by numerous companies and the banks/NBBFC/funds that provided the loans to them. Users can evaluate and compare loans for commercial properties and do so much more on CRE Matrix platforms. 

For more such exciting analysis and details on real estate, visit CRE Matrix.

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Significant Clauses in Commercial Lease that Tenants Need to Know

When you sign on to a commercial property on lease, a contract for the same needs to be carefully executed and planned. There is generally a massive rental outgo in commercial establishments and therefore, the premises to be taken on rent needs to be completely checked. The rental agreement becomes a vital part of your business and the conditions therein will affect your work and operations, as long as you are on those premises. 

Let’s look at some of the important clauses in a commercial lease India that a lessee should be aware of:

Competitor Clause: It’s imperative that you try to get a competitor clause in the leasing contract. This clause will prevent the landlord from renting out space in the same building, in which you are shifting, to your competitor. This can work out to be extremely useful, especially if you’re a retailer. 

Concessions in Rent: You need to find out if the landlord can offer specific relaxations, such as waiving the rent for the initial one or two months of the lease duration. Landlords can be flexible if the premises have been available for quite some time. Other relaxations can comprise sharing of renovation expenses or a paint job for the premises that will be paid for by the landlord. 

Gross Rent Lease or Net Rent Lease: There needs to be sufficient clarity between your landlord and you, about the elements other than the rent, such as maintenance fees, property tax, insurance, and expenditures towards common areas.When it is about the gross rental deed, you will be responsible for paying the rent and other relevant expenses. In a net lease deed, you will only be entrusted with the task of paying the base rent. 

Lease Termination Conditions: This is a significant clause in commercial lease. Inspect the conditions, under which the landlord can end the lease, as they can often be tight. One needs to plan for circumstances where the building is sold by the landlord, while the lease term has not finished. 

Lease Renewal Clause: Lease tenure of one or two years will offer you the flexibility, especially if you own a small business, to move out for expansion or to better premises when needed. Nevertheless, there needs to be a clause to renew the agreement, after the initial one or two years, at the same rent or a hike that has been agreed upon mutually. When you take a commercial space on rent, your leasing agreement needs to have a proposed escalation in rentals in writing, in case you opt to renew the contract. 

Security Deposit and its Return 

There will be a set sum that you would have to deposit with the landlord as security. This security deposit will be equivalent to two or three months’ rent. You need to try and negotiate the amount you have to keep as the security deposit. If you find that there are numerous vacant establishments in that neighborhood or if the landlord is not corporate, there is more scope for negotiation to work. Tenants need to also inspect the conditions relating to the return of the security deposit. 

In a nutshell, these are a couple of the significant clauses in a commercial lease every tenant should be aware of. 

CRE Matrix will give you all the leasing data including clauses across businesses and sectors. 

For more such exciting analysis and details on real estate, visit CRE Matrix.

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Real Estate 101 – All About Commercial Property Leasing in India

The real estate industry is regarded as one of the most universally recognized sectors. It contains four sub-sectors including housing, hospitability, retail, and commercial. The evolution of this industry is accompanied by the development in the corporate setting and the need for office space as well as urban and semi-urban accommodations. 

In India, the real estate sector is considered to be the second-highest employment generator, following the agriculture industry. It is anticipated that this sector will gain more non-resident Indian (NRI) investment, both long term as well as short term. Bengaluru is believed to be the most preferred property destination for NRIs currently. 

While there is a high demand for purchasing commercial properties, there is a rise in leasing commercial lease India as well following the reduction in the severity of the pandemic. 

What is Commercial Leasing?

A commercial leasing India is essentially a lease that is utilized for a commercial property where a company would conduct its business. These leases comprise an array of unique terms, including tasks connected to the upkeep of the property. 

Unlike residential leases which are quite easy to comprehend, a commercial lease can be a little more complicated as it comes with numerous terms and conditions. Moreover, commercial property on lease is notonly given out to people but also to entities like the sole proprietorship, corporates, or HUF. 

Kinds of Leasing Structures in India

On a broad level, there are roughly two main types of leases in India:

Financial Lease

It refers to a long-term duration lease. It encompasses the capital outlay in addition to the required rate of return on funds for the duration of the lease. In this case, the lessor plans to cover the expenses of the capital of the property and also wants to acquire some required rate of return. This financial lease cannot be canceled and the lessee has to make several payments in order to use the property. 

In this case, the property rights continue to stay with the owner during the lease period. However, when the lease is about to expire, the tenant party is provided the choice to buy said property by paying the residual money. The amount is generally estimated at 10% of the value of the property or less. 

This kind of lease can be observed as a loan. The lessee will keep paying the lease rent and pay the remaining amount in the end to own the property.

Operating Lease 

When it comes to operating lease, the legal ownership of the property remains in the hands of the owner of the property. The owner only spreads the right to use his property for economic uses or business purposes for a pre-defined duration of time. 

Once the duration of the lease is coming to an end, it can be determined whether to lengthen the lease and continue to allow the usage of the property to the lessor or terminate the contract. In this case, the ownership always lies with the true owner throughout its run. 

If you wish to look for commercial properties for rent, you can take the help of India’s best real estate data analytics company – CRE Matrix – that allows stakeholders across different industries to view significant leasing data of various companies. 

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A Comprehensive Guide to the Leasing Process in India

Singing a lease is a significant step for any new business owner. Whether you’re inaugurating a store, shifting to new office space, or renting out your facilities, leasing comes into the picture. The universe of commercial real estate India can be complicated, and it can sometimes even take years to find your perfect space. 

Once you have found that space, signing the agreement would be the next step before you can move in and focus on running your company. But, like most legal contracts, a business lease is a significant document that needs some research. 

Let’s look into the steps that are involved in the leasing process in India: 

Lease Selection: 

You have to zero in on the commercial property you wish to conduct your business. The leasing process begins when the lessee agrees to enter into a leasing agreement with the lessor. After gathering information and conducting thorough research, the lessee goes to the leasing company or broker (lessor) and a lease contract is roughly negotiated and finalized between them. 

Title Ownership Validation: 

As a business owner, you need to make sure that you have all the details and the information pertaining to the ownership of the property. This is why access to the title deep is absolutely essential to validate the lease. Check to verify there is no sub-rent of any other form of lease linked to the property before getting into a contract with the landlord of the commercial property. 

Income Tax & Mortgage Verification:

It is absolutely recommended to check the income tax background of the landlord to investigate if there are any remaining disputes or illegal proceedings. If there is any ambiguity, you could get into serious trouble later and there will be financial consequences. 

Lease Contract: 

One of the most significant parts of the leasing process is the lease agreement. Both the lessor and the lessee need to sign a contractual agreement where they list the details, terms, and conditions of the contract. The duration of the lease agreement will be cited. For instance: A typical commercial lease agreement can last from 3 to 5 years. It could either be a full pay-out lease or nominal rentals may have to be paid. 

Lease Period: 

Generally, the regular lease rental is usually paid by the lessee. While this depends on the agreement, usually the tenant is the one who is entrusted with the responsibility of properly maintaining the commercial space. At the end of the lease period, the lessee has the right to either renew the lease or terminate it. If the property is up for sale, they can even try buying it. 

Once you have gone through the leasing process, you can move in as per the commencement date and begin running your business on said property. 

If you’re looking for a commercial property to lease, CRE Matrix can help you by offering you an extensive line-up of properties all over India along with their lease data. 

For more such exciting analysis and details on real estate, visit CRE Matrix.

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Real Estate Leasing 101 – Passing Rent vs. Market Rent

When rentals for a particular asset, micro-market or city are analyzed, traditional platforms talk about the quoted rents. However, quoted rents can significantly vary as these are not the “transacted” rents and can include a lot of irrational premiums.

The most appropriate measures of rentals for any asset or region are two – Market rents and Passing rents. Average annual rent could be a confusing term for many, which is why it is important to understand the difference between market rent and passing rent.

What does passing rent mean in real estate?

Passing rent of an asset is the weighted average rent which all tenants in that asset are paying today, irrespective of when their tenancy started in the asset. When landlords or brokers are looking for fair rental value, it is important to look at passing rentals.

What does market rent mean in real estate?

Market rent of an asset is the weighted average rent which all tenants in that asset are paying today, for only those tenants which either signed a new lease or a renewal lease in the current year. It does not include the weighted average rentals of any tenant whose lease would have commenced earlier than the current year. Market rent estimate is often not calculated in the way it should be. One way to do it is to bifurcate it into passing and market rentals.

Take a look at the passing vs. market rent for Gurgaon from 2017 upto 2022, documents accessed through CRE Matrix.

Passing Rent vs. Market Rent – Gurgaon

The average passing rent for Gurgaon in 2017 was Rs. 74.3 per Sq.ft in a month as opposed to the market rent that was Rs. 79.3 per Sq.ft on a monthly basis. The trend for the average passing rent to be lower than the market rent continued in 2018, 2019 and 2020 as well. In this case, the market had shifted towards the landlords as new tenants would have to pay more rent according to the rates charged by the market.

The pandemic had a serious impact on the average passing rent and the market rent. In 2021, the average passing rent was Rs. 90.4 while the market rent was only Rs. 81.6. In 2022, so far the average passing rent is Rs. 93 per sq.ft in a month in Gurgaon as opposed to the market rent being Rs. 81.9 Rs per sq.ft per month. In this scenario, the market had titled towards the tenants as voluntary exits puts pressure on the landlords. Hence, as rentals declined a bit, the market rentals had gone below passing rents in some regions.

CRE Matrix has analyzed lakhs of rental documents across India and has assessed the market rent and passing rent for these commercial premises. CRE Matrix is the country’s most preferred authentic analytics platform that lets stakeholders from various sectors evaluate the passing vs. market rent and so much more.

For more CRE industry insights and data research do contact us.

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10 Factors to Consider before Purchasing Commercial Property in India

With the rising growth of the country’s population, the demand for commercial real estate India has also substantially increased. This is why investing in commercial properties can assist you to yield high returns on investment. Buying commercial real estate is not as complicated as it might look. 

You need to consider some of these commercial property tips before finalizing them for purchase: 

Market Research

When you start the process to buy a commercial property in Pune, you need to spend some time analyzing the trends of the market well in order to acquire a profit. Before you purchase a property, it is vital to assess the scope of the future development in the locality. When you invest in a project in a developing area, it is more lucrative as it provides you high returns on investment as compared to purchasing a property in a well-developed area. 

Assess the Location

Location is a significant factor that needs to be factored into while you buy commercial property Bengaluru. The location needs to be accessible from other locations with a robust infrastructure. If you purchase a property in a premium location, it is sure to guarantee high returns on your investment. 

Types of Commercial Properties 

Commercial real estate comprises industrial complexes, retail shops, big apartment buildings, office buildings, and many more. When you have decided to dabble into commercial property buying, you need to determine the kind of real estate you would want to deal with. 

Evaluate the Layout Plan 

The layout has a chief impact on operational efficiency. Ensure that the project has been given all the approvals from the concerned authority so that you don’t end up making any incorrect investment decisions. 

Lease Structure 

This lease is a long-term contract between the owner of the commercial space and the occupier. While assessing an investment, the tenant needs to comprehend the lease structure and the risk involved in the investment. 

Pick the Appropriate Builder 

While you invest in a commercial property, ensure that you choose a well-respected building with a proven track record of successfully completed projects. You need to cross-check and verify the credibility of the builder before you finalize and zero in on a commercial property. 

Recognize the Element of Risk

Prior to purchasing any commercial property, you need to keep in mind all the possible risk factors. Monitor the market trends, the geographical location, and the building’s history to assess the risk involved in purchasing the commercial property. 

Value Assessment 

Examine the value of similar properties in the proximity and amass information on the types of rents that other properties have so that you can negotiate well with the seller. In order to make a good commercial deal, negotiation is significant. 

Evaluate the Rental Earnings Post Tax and Insurance 

Assess the earnings that you will make after you pay for the tax and insurance to understand how much you can earn on a yearly basis after subtracting all these expenses. It will help you to understand what your investment will look like in the future. 

Quality of Tenant 

A good-quality tenant can help to considerably increase the value of a commercial property. Good tenants pay rents on time, pay higher deposits, stay longer, and help boost the value of the property. 

At CRE Matrix, you will be able to look at a number of commercial properties and the comparables in the market that can help you make a decision. 

Visit CRE Matrix for more such exciting analysis and details on real estate.

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5 Ways to Apply Data Science to Commercial Real Estate in India

The commercial real estate sector in India is on its way to slowly bounce back and recovering in a post-pandemic world. The start of 2022 has unlocked many potentials and scopes of the commercial real estate industry in this country. Increasing demand for appropriate workspaces, commercial properties, and creative concepts in this industry will aid in powerful development. 

With the commercial real estate sector almost returning to its pre-Covid levels, data has become an extremely vital ‘raw material’ of the industry today. Data science has evolved into a separate study thanks to its importance in contributing to the growth of the real estate market. 

Real estate data analytics companies make use of advanced-level analytics and machine learning models to assess information that helps in making better decisions. With its assistance, you can understand consumer behavior, business strategies can be improved, promising market trends can be weighed and any predicted risks can be tactfully averted and dealt with. 

Let’s take a look at how data science can bring about major changes in the commercial real estate sector by helping professionals make well-informed decisions. 

  • Evaluating Data to Estimate Market Trends

Commercial real estate data analytics can assist in predicting property market trends and any risks that might come up in the investment. By using data that comprises a combination of various variables and predictive analysis; it can assess how consumer groups have been behaving over the years, what kind of properties are in demand, the type of leisure activities that consumers like, and how the rent charges have evolved over time. These factors play a huge role in deciding how well or poorly an investment would be able to perform. 

  • Creating the Property Price Indices 

One of the most vital applications of data for commercial real estate is to gather and leverage details connected to the adjoining local areas. Qualitative and quantitative variables play a role in influencing the pricing of commercial properties. Moreover, these elements also work to provide us with a fair idea of which areas might emerge as popular in the future. 

  • Comprehending Performance of Investments 

In the real estate sector, no two properties can be similar. Variables are different even with properties that exist in the same building, not to mention the fluctuating value of properties over time. The evolving rate of an asset, pertaining to the lifecycle and current/future infrastructure, can be traced over the years by making use of data science in this field. 

  • Recognizing & Segregating Leads 

A great way to leverage the power of data science in commercial real estate is to nurture leads. Generally, it is tough for agents to follow up on all the leads that are generated from the many online and offline marketing campaigns. Nevertheless, real estate data providers who have relevant applications and software can provide a ‘seller or buyer score’ to leads that are more likely to sell or purchase properties. This evaluation is made by assessing elements such as demographics, income changes, and buying behavior. 

  • Gauging Profitability of Investment & Construction 

If you’re planning to invest in a commercial real estate space, location intelligence is an extremely significant feature to measure whether the investment would be able to deliver the anticipated profits in the future. Data science in real estate can also prove to be useful to assess environmental conditions so as to finalize a suitable time for the commencement of the construction activities. 

CRE Matrix is India’s best real estate data analytics company that uses data science to help stakeholders across various sectors to assess and compare leasing data and more. 

For more such exciting analysis and details on real estate, visit CRE Matrix.

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5 Major Forces that will Drive Commercial Real Estate Industry in India in 2022

In 2021, there has been a tremendous development in residential and commercial real estate in India. The market was already growing as the requirement for residential apartments and plots rose post nationwide lockdown. The property rates observed a huge increase in demand and prices per square foot.

commercial real estate

Apart from commercial areas that tailor to the daily or weekly needs of the residents, the corporate world has started to convey interest in mounting operations, thanks to enhancements in connectivity and anticipated economic development.

We could witness further liquidity transferred into commercial real estate this year. It is believed that the year 2022 will see a growing surge for appropriate workspaces, freehold commercial and residential properties, and new concepts that will increase returns for investors. 

As we go deeper into 2022, here are a couple of forces that will push the commercial real estate industry in India.

Residential Property Market is Expected to Rise

After an extended duration of dropping and then stabilizing, residential property rates are possibly expected to begin rising again. Approximately 5% capital value growth has been estimated for the residential property segment in India in 2022. 

Several of the supply and demand-side factors are taken into consideration and evaluated over the last decade. This drive is projected to continue in 2022 as potential homebuyers’ preferences for larger residences, improved facilities, and lucrative pricing will help seal the deals. 

Foreign Investment is Estimated to Push this Sector

Foreign Direct Investments (FDI) will continue to be a significant development driver, and the same is valid in the case of the real estate players as well. Indian real estate has managed to draw a huge amount of foreign moolah, particularly in the residential market. With RERA assuring transparency and laws permitting 100% FDI in construction, Indian real estate is observing pointed investment infusions from NRIs. 

Property Rates Projected to Rise

In 2020, approximately 1.38 lakh housing units were sold. When you pit it against the previous peak in 2014, this was considered to be a rock bottom of 60%. Nevertheless, between January and September 2021, 1.45 lakh units were sold. There was a 5% surge in sales in 2020. 

Increase in Demand for Co-working Spaces

In 2020, there was significant growth in office closures and a swift shift in ubiquitous remote employment globally. This trend carried on in 2021. However, as the vaccines started rolling out, people slowly returned to their workplaces. Thanks to the pandemic, firms have had to spend time and money investing in digital abilities to let employees work from home. 

Businesses are seeking new working approaches while allowing workplace flexibility to make sure that profitability balances well with employee well-being. The most obvious development has been the surge of a hybrid workforce across an array of workspace choices, including flexible offices. 

Growing Demand for Data Centers

The massive digital push generated by the COVID-19 pandemic has been lucrative for data centers which could still offer an approximate 15% rental yield. Firms started to modify their digital infrastructure to cater to the new work environment instantly after India went into lockdown due to the pandemic, thereby leading to a 25-35% increase in data center capacity. 

The year 2022 is also believed to observe an increase in SCO (shop-cum-office-space) concept development. These SCO plots will assist entrepreneurs to develop their business concepts by owning a commercial space at moderately placed prices with advanced amenities. Sharp investors can witness the benefits of a well-equipped setting that backs retail or office in a favorable market. Mixed-use commercial spaces will help investors in expanding their risk in the investment portfolio by making the most of the new evolving idea. 

For more CRE industry insights and data research do Contact us.