Mumbai, being the financial hub of India, has increasingly become the valid option for investment in commercial properties for the investors. Most people find it difficult to decide in which locality and which property to buy, however, the trickiest part is leasing the property. Commercial properties are little more mysterious than residential properties. It is very important that the one who is handling the management of such property need to have a deep understanding of each and every aspect of leasing right from finding a tenant to signing a lease.
Following are the key aspects and other relevant information about Commercial Property Management Services in Mumbai:
- Find a tenant
The very first step in leasing a commercial property is finding a right tenant. The investors, who are well connected and have a reliable tenant on their contact list, try to find one on their own. It that is not the case, finding a tenant and managing them is a tedious, time consuming and expensive task and sometimes you end up renting the wrong tenant. Rather than dealing with multiple landlords, consultants and agents, working with professional property managers is a better option. A professional consultant has exposure to a lot of potential corporate and multinational tenants looking for MahaRERA Registered Projects. Sometimes leasing to a multinational company is beneficial as they are less fussy and agree to all terms and conditions. There are high chances that they will lease the property for a longer period of time and will not default on rents. However, it is always a good idea to do your own research. Before letting the property on lease, check their financial condition, credit history and previous history.
- Negotiating on terms and conditions
In case of a commercial lease, lock-in period, termination or exit clause, escalation, rent clause, sublet or assignment rights, scalability or first right of refusal and more are few key transaction aspects. It is very much advisable that as a landlord you pre-decide on them before finalizing the deal. Apart from these, there are other periodical costs involved on commercial properties like takes and maintenance charges, TDS (tax deduction at source) and service tax. It is important that the landlord clarifies with the tenant as who will be paying the taxes and future increases thereon and any government assessment in future. Usually, property taxes are paid by the landlord or the developer and the maintenance costs are borne by the tenant. TDS and service tax are applicable on rent and usually, bear by the tenant.
- Signing an agreement
After the terms and conditions are finalized and both the parties have agreed upon them, one needs to sign the lease. Usually in India (except Maharashtra), the typical lease term is 3+3+3 years with renewal options after the first term. Usually, in Maharashtra, leave and license agreement is signed for a maximum of five years and this includes renewal clauses. Rents are normally fixed per year and reviewed thereafter. Like in Maharashtra, the landlords are only allowed to increase the rent by flat 4% per year. An agreement is frequently signed in conjunction with a Leave and License agreement or a Lease agreement.
- Registering the lease
Once the lease agreement is signed, it needs to be registered with authority by paying registration cost and stamp duty and its costs are generally borne by the tenant. Both are pre-defined and governed by the local sub-registrars. They evaluate them in the context of a market value assigned to their records for each region or sub-region of the city. Stamp duty or registration costs are not payable on an amenities or services agreement. Rs. 100 or more stamp paper is required for this agreement.
The job of the landlord doesn’t end here. Property Management in Mumbai is a full-time job. However, to make the investment less troublesome, many investors hire a property management services to handle rent collection, deal with ad-hoc tenant queries, do essential maintenance work, execute escalation in case of renewal and regularly inspect the property. Performance of your rental property largely depends on the type of tenant you have on it.