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7 Crucial Points to Keep in Mind before Signing a Rental Agreement

Renting a home in India can be quite complicated because of the research and the planning required. If you wish to rent a home in India, it is extremely vital that you’re aware of what to look for prior to signing a rental contract. 

There are numerous elements that can be included in a rental agreement, and not all of them are beneficial to the tenant. In this article, we will talk about some of the most vital things you need to check before signing a rental agreement in India. 

What the Rent Includes

You need to thoroughly check the rental contract. Generally, the monthly rental amount typically comprises utilities such as electricity, water, and gas. However, be sure to check if it also contains maintenance charges and property taxes. 

Kinds of Tenancy

There are two kinds of tenancy agreements in India – the leave & license agreement and the lease agreement. A leave & license agreement consists of a duration of 11 months, after which it can be renewed. A lease agreement has the lease tenure for up to at least 12 months and can be renewed once the term is over. 

Notice Period & Penalty

If you’re looking at homes for rent India, one of the most important things to look at would be the notice period and penalty. The majority of the rental agreements have a minimum notice period of 30 days (one month). If you wish to leave earlier, make sure to check if there is a clause that talks about an early exit fee. Generally, one month’s rent would be charged as a penalty. 

Rent & Deposit

It is important to check the monthly rent amount. Ensure that the rent is budget-friendly for you and that it is light in your pocket. It is also imperative that you check the amount for the security deposit. This is generally one month’s rent but it can change depending on the landlord the agreement can differ depending on the landlord. The contract will state the monthly rental amount and the security deposit. Be sure the rental amount is aligned with the relevant market rates. 

Register the Rental Agreement 

Once you have signed the rental contract, ensure that it does get registered at the office of the sub-registrar. The fees for the registration are generally around 0.25% to 0.50% of the entire sum of the agreement. 

Check for Lock-In Period 

The majority of the contracts have a lock-in period of approximately 3 years. This means that you cannot exit the property before this period is over. 

Duration of Rent 

When you’re looking at available flats for rent in Mumbai, it is imperative to look for the length of the lease in the rental contract. The tenure of the lease is generally around 11 months, after which it can be renewed. Be sure to check if there are any clauses that state an escalation in the rent after the initial first year. Make sure to enquire about it before you sign anything. 

If you wish to know more about the various residential projects by a number of developers across India, then subscribe to CRE Matrix, a leading real estate data analytics company in India, as they can offer several tools to facilitate this. 

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

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Real Estate 101 – A to Z about the Lock-In Period in a Leasing Contract

Commercial properties such as office buildings or warehouses can be observed as excellent investments. This is because they deliver high yields, are reliable, and escalate over time. It is well-known that location affects the value of a property. If it’s a commercial property with a high degree of accessibility, it is natural for the asset to make a high rent. An important but usually ignored part of CRE investments is generally the lease and lock-in periods. 

What is a lock-in period? 

Lock-in periods belong to a part of the lease contract. The significant bit is – while landlords are tied by the lease duration, lessees are bound by the lock-in period. If a property has a lease term of 9 years and a lock-in period of 3 years, the tenant needs to continue staying in the space for 3 years or pay the rent for the lock-in period if they choose to shift basis. 

Why is a lock-in period significant? 

A clause with the lock-in period in leasing agreement India is extremely important because it makes sure your returns are steady and guards your investment against struggling. Even if the lessee decides to abort the ship or the market conditions go bad for some reason (a pandemic, for instance), a decent lock-in period can be a saving grace in this scenario. It gives you more time to look for a new tenant or wait for the market to bounce back while still providing you with a return on your investment. 

So, what’s a ‘good’ lock-in period? 

In commercial real estate, the lock-in period in leasing can change from 3 years to anything like 9 years. That’s a substantial range and it generally comes down to the kind of asset and tenant in question. For instance: Firms that are into manufacturing need an industrial space that they can personalize to the last bit. They seek out longer lock-in durations (occasionally 15 years or more), since their work floor is regarded as the most stable portion of their business. 

White-collar companies require offices. They need desks, chairs, and some computers, and their necessities are met. This is why these companies want lock-in periods that are on the shorter end of the spectrum (lesser than 5 years). When it comes to warehousing, the lock-in periods typically tend to remain within 5-9 years. 

When you’re deciding to invest in commercial real estate, do keep in mind the type of property and the lock-in period it has, irrespective of the tenant. If the period is too less (e.g. lesser than 3 years), the tenant might not consider sticking around. If you’re not able to renegotiate for a longer lock-in with the tenant, it is best not to go for the property.

On the other hand, if the lock-in is too long, you have to pay the rent that’s lower compared to the market average, which is still fine as long as you are making stable returns. Several other intricate details need to be taken into consideration when you’re deciding to invest in a commercial space in India. 

CRE Matrix is a leading company that offers real estate data analytics India. It offers elaborate details about the leasing status of numerous businesses across the industry. You can take a look at what their leasing agreement entails including the lock-in period clauses of those contracts. 

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

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4 Things You Need to Know Before Signing a Contract for Leasing Commercial Space

Signing a lease is a significant milestone for a new business owner. Whether you’re launching a store or shifting to a new office space or leasing out facilities for production. At some point, you’re most likely going to have to set aside some space for your business. 

Once you have zeroed in on the space, signing the agreement often feels like the final step before you can shift in and concentrate on running your business. But similar to the majority of other legal agreements, a business lease is a vital piece of document that needs thorough research. 

The fine print in a commercial lease is extremely imperative. There are two basic steps that need to be followed prior to signing a lease: 1) Conduct a thorough search and 2) Need to know of general statutes that are included in business leases. 

Once the basic pricing and term structures have been established, it’s time to understand some of the less-obvious details. Here are a couple of things a business owner needs to be aware of before signing a leasing contract India:

Transfer Structure: Determine how your lease will get transferred if you wish to leave the space or your business shuts down. Typically, there are two structures for transferring a lease: assignment of the lease and subletting. 

Assignment of the lease refers to the fact that the complete lease is reassigned to a new tenant. Subletting happens when an existing tenant keeps their name on the lease but is given payment from the new tenant and then pays that money to the landlord. 

In both scenarios, you generally have to specify prior written consent before transferring the lease in the leasing agreement.

Personal Exposure: In a few cases, you may be needed to sign personal guarantees when you are leasing commercial space India. These contracts mean you’re personally on the hook for features of the lease even if your business defaults. Get legal counsel to negotiate this part of your agreement. If possible, you would only want your entity or legal business to take on the gamble when you’re signing a business lease. 

Holdover Rent: It essentially refers to a rent increase when the tenant continues to stay even after the lease has ended. For leasing office space Mumbai, a number of agreements, have a clause where it’s stated that, in these scenarios, businesses are accountable for up to 250% of their standard rent payment on a monthly basis. So, if you stay beyond your allotted time, it could cost you a lot of money. 

Non-disturbance Agreement: In numerous cases, if the landlord is not able to pay the mortgage on the property, the business will still be evicted, even if their making all of your payments, With a non-disturbance agreement, if this happens, you will be allowed to stay and continue paying whatever entity has seized control of the building from your landlord. 

In a nutshell, these are the five things you need to be aware of before you sign a lease agreement. Check out CRE Matrix, a leading real estate data analytics company India, which allows you to take a sneak peek at the lease agreement status and other details of numerous businesses across the country. 

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

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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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What Are The Different Types of Tenancy Agreements in India?

When a property is rented out, a Tenancy Agreement is essential to specify the terms and conditions, that have been approved by both concerned parties and to describe the details of the landlord-tenant relationship. In case of a disagreement, it could end up becoming a basis of conflict. 

What is a tenancy agreement?

A tenancy agreement India is a legal document that elaborates on the terms & conditions of a lease and rent partnership between two people. A tenant is an individual who is allowed to use a property under the rental agreement terms. 

There are several kinds of agreements when it comes to renting or leasing a property. While a rental contract is controlled by the Rent Control Act, the Lease & License agreement is regulated by the Indian Easement Act. Landowners need to know that if the tenant is a danger to society and there is no Tenancy Agreement in place, the landowner can be held responsible.

Let’s look at the different kinds of tenancy agreements in India:

The tenancy agreements in India are categorized into three kinds:

  1. Rent Agreement 
  2. Lease Agreement 
  3. Leave & License Agreement

Rent Agreement

A rental contract is a legal agreement between a property owner and the prospective tenant who wishes to take temporary possession of a particular property. The agreement showcases information, like the name of the property owner and the tenant, description of the property, amount of rent that was approved, late payment fee, grace period, security deposit amount, facilities that the tenant is allowed to use or not, provision and right of parking, property insurance, maintenance & repairs, among many others. 

Whether it is a commercial rent agreement India or a resident rental contract, they are generally for a shorter duration, typically 11 months in India. A rental contract is a brief concord, thereby allowing a trouble-free settlement between the two concerned parties. 

Lease Agreement 

A lease agreement India is typically needed in case of a longer occupancy period. When the landlords wish to avert the fluctuations in sustainable income, they prefer to have the property on lease. The lease agreement is regarded as a contract between the landlord and tenant, where the tenant is issued the right to use the specific property for the computed time frame (usually over 12 months). 

Generally, a leasing contract connects the landlord and the tenant for an approved time span, as opposed to a rental contract. A few leases are for 99 years. Additionally, a lease generates interest in the property, is transferable, and creates inheritable rights. 

Lease & License Agreement 

The Leave & License Agreement is regulated by the Indian Easement Act 1882, and it is not the same as lease and rent agreements. This specific type of contract is a document via which the property of the Licensor is used by the license holder. However, the property is given on the basis of the Lease & License agreement and not on the basis of the tenancy. When no such permission exists, the right for the property would be deemed illegal. 

CRE Matrix, a leading real estate data analytics company India, offers leasing & rental status of numerous companies across sectors on a pan-India basis. 

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