India’s Property Leasing Market and Policy is as Colourful as the Country
With India as the upcoming economy, many foreign companies are making their way to set up a business in India. Navigating India’s policies, legal framework and culture can be quite challenging. When you thought company incorporation matters were over, here comes the next chapter, finding the suitable office premise. Worry no more, help is always available. Using this India office premise leasing guide, we hope it can be as much as help as it is useful for your current state and your future undertaking.
The Future Company
No matter what your current capacity is, the way forward would lead to business expansion. Although there is a trend of co-working space available almost anywhere in the world, there still a demand for full-fledged office space by foreign companies. Where you intend to invest in India, determines your future company location. The location partly contributes to the success of the business other than how well you navigate the local business scene. For most of the time, leasing an office space is a long-term investment. Hence, you would need to think things through to ensure you can maximise capacity to the benefit of your company.
Historically in India, when it comes to an office premise leasing, it was a lasting lease. Meaning there was no way to terminate a lease term. But, that is no longer practised in India, hence the sigh of relief. Nowadays, most leases are renewable, but there are many types of office premise lease in India that could catch you by surprise. The following are the common types of lease applicable in India.
- Net Lease – where the tenant is responsible for paying rent and property tax.
- Double Net Lease – tenant has to pay rent, property tax and insurance.
- Triple Net Lease – tenant pays rent, property tax, insurance and operating cost.
- Gross Lease – tenant pays the landlord a fixed rent. Landlord pays the insurance, taxes and maintenance fees.
- Modified Gross Lease – tenant pays a fixed amount of rent and also janitorial services for their space.
- Industrial Gross Lease – tenant pay rent plus janitorial services and share of utilities.
- Full-Service Lease – Rent amount includes all services available in the building. The tenant can expect to use such services where applicable.
- Percentage Lease – This depends on the percentage of gross sales. Indirectly, you need to ensure business success to pay up this kind of lease.
- Step-Up Lease – Both parties agree to rent increment by a pre-set rate, paid according to schedule.
- Flat Lease – A lucky tenant will get to pay a fixed amount throughout the lease term.
The Details in the Lease
1. Parties and Premise
Every lease must clearly define The Tenant and The Landlord or Premise Owner. The space on lease is called premises and be clear of what you are entitled to.
2. Term Period and Commencement
For every lease term, there is a period of the lease: the start date and the end date. The tenant should also inform the landlord if they require to do office fitting works and renovation works. Thus, it is essential to state the rental commencement date.
3. Rent and Additional Payments
This would refer to the type of premise lease as mentioned above. Landlords should make it clear if there is a late payment penalty in the lease agreement.
4. Common Area Maintenance Expenses
Building owners may include common area expenses in the lease agreement. But, discuss with the landlord of the reasonable costs that you should also share.
5. Premise Repairs
Generally, the landlord is responsible for any premise repairs. Thus, the tenant is responsible for keeping the premise in good condition. Some landlord provides for all damage repairs, and some landlord may require the tenant to repair the damage themselves. Discuss if tenants could withhold part of the rent as payment for repairs.
6. Complying With the Law
Naturally, the landlord should bear this responsibility. They have to ensure that premise is fit for business use. Another compliance is that if the lease agreement is more than a year, it must be stamped and registered. Otherwise, the document is not valid if there is any dispute arising from the lease term.
Both parties can terminate the lease term provided either party should give a notice in writing at least six months in advance. Generally, tenants will need to pay up for the balance of rental when the termination request comes from them.
8. Operational Needs
Tenants should enquire if the rent would include items such as parking space and other operation needs relevant to their business. Thus, the landlord must provide for such, unless it states otherwise in the agreement.
There you have it, a general India office premise leasing guide that you may find useful before committing to rent an office in India. When you have found your ideal office, be sure to negotiate reasonable rental rates given the amenities available at the moment in time. Always have professional help at hand to look through the agreement before signing anything.