Commercial Space, Office and Land Leasing in Kerala

Commercial Space, Office and Land Leasing in Kerala

According to Investopedia, a lease is defined as:

A legal document outlining the terms under which one party agrees to rent property from another party. A lease guarantees the lessee (the renter) use of an asset and guarantees the lessor (the property owner) regular payments from the lessee for a specified number of months or years. Both the lessee and the lessor must uphold the terms of the contract for the lease to remain valid.

Commercial leasing in Kerala follows the same norms as those outlined in the definition above. A lease agreement is made between two parties, binding them both in a legal contract for the duration of the lease.

The terms of the contract are outlined in the legal agreement and will include such details such as the address of the property, duration of the lease, monthly rental to be paid, facilities available on the property, and conditions for the closure of the lease.

The following types of properties can be leased for commercial purposes:

1. Showroom spaces – These are large, empty spaces that are ideal for businesses to display their wares.

2. Standalone shops – These are individual shops that are not part of a commercial complex.

3. Shops in a mall – These refer to shops within a mall or a commercial building complex.

4. Office spaces – These are spaces with required amenities to operate an office from.

5. Building complex – This refers to an entire building complex that can house a number of shops.

6. Warehouses/Godowns – These are large buildings that can serve as storage space for businesses.

7. Vacant land – This is usually a large plot of level ground that can be used for special events.

Leasing Mechanism

Leasing usually refers to long term renting of a property for commercial activities. It is usually done for a duration of 3 to 10 years, or even more.

Legal Aspects

The leasing contract requires legal registration for it to be perfectly valid. It can be registered in the local sub-registrar’s office just like any other property.

Lease Registration Costs

Current lease registration costs are as listed below:

Upto 5 years Upto 10 years More than 10 years
Stamp Duty 5% of Annual Rent 6% of Annual Rent (Avg Annual Rent x 2 ) x 6%
Registration Cost 2% of Annual Rent 2% of Annual Rent 2% of Annual Rent


Property Evaluation Factors

There are a few factors to help with the evaluation of the commercial property that is to be leased. Not all these factors will be applicable for all types of commercial property. You can consider only those that matter.

1. Road access – Does the property have direct road access? Will it be easy for people to reach the property?

2. Property frontage – What is the width of the property frontage? How much space is allotted in front of the property?

3. Building height – What is the height of the entire building?

4. Parking space – Does the property have allotted parking space? Is the space sufficient?

5. Shape of the space – Is the shape of the allotted space feasible for the designated use?

6. Specific floor – Which floor/level of the mall or building complex is the space located? Is it ideal?

7. Proximity of other commercially feasible activities in the vicinity – Are there any other commercial places in the locality? Will there be a lot of people frequenting the area?

8. Amount of display space – If it’s a showroom, how much space is available to display the products?

9. Carpet area – What is the actual carpet area of the property when compared to the total area?

10. Maintenance cost – How much will the regular maintenance cost? This includes amenities such as water, electricity, elevator, fuel for the generator, security services, etc.

11. Nature of the property – In what stage is the property currently in? If the building only has a shell structure, who will be responsible for developing it?

12. Number of beams within the property – If it’s a large showroom space, how many beams are there within the building?

13. Internal height of the property – How high are the individual rooms or spaces?

Evaluating Factors for the Leasing Deal

leasing-agreement-keralaThe lease agreement has to be formulated with great care and preferably with legal assistance. Here are some factors that have to be considered when finalizing the leasing deal.

1. Lease term period – How long will the contract last for?

2. Service tax – Has the service tax been included in the lease amount or has it been left out? Who will be responsible for paying it?

3. Termination conditions – On what basis can the deal be terminated? What are the steps to be followed for termination of the deal?

4. Rent-free period – Some high-cost leases allow the lessee to stay rent-free for a certain period. Does the deal include a rent-free period? If yes, when do they have to start paying the rent?

5. Lease deposit amount – What is the advance payment on the lease to be paid by the lessee?

6. Maintenance – Who will bear the cost of regular maintenance of the property? Who will be responsible for maintaining the property?

7. Property alterations – If the property has to be altered to suit the lessee’s commercial activity, who will bear the responsibility of altering the structure and/or setting up the interiors?

8. Frequency of rent increase – How often will the rent be increased? Will it be annually or bi-annually?

9. Rent increase percentage – By what percentage will the rent be increased every time?

Commercial Property Classification for Leasing

A more broader classification of commercial property for leasing purpose can be done as follows:

1. With building already constructed – This type of commercial property is one where the construction is fully complete. It is usually used as office space, showroom space, stand alone shops, shops in a mall or a building complex.

2. With building constructed as per the client’s need – In this case, only the basic structure (permanent or temporary) is put up and it can be built upon based on what the lessee needs. This type of property is suitable for warehouses, godowns, restaurants, etc.

3. Vacant land – This refers to a large portion of land that is leased out as a whole. The lessee might construct a permanent or temporary structure on the land according to their business need. Once the lease period comes to an end, the lessee will either have to restore the place and move out, or renew the lease for a prolonged period.

There are a lot more factors to be evaluated in choosing a commercial property suitable for leasing, when compared to a residential property. It’s best to get the expert opinion of a real estate consultant before you finalize a commercial leasing deal. They might even be able to help you negotiate and get you a better deal!

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2 Comments
  1. I had sent an email with specifics of a property in Ernakulam I am considering renovating / reconstructing / leasing out … Awaiting response. What would be the lease rental per sft of plain open land of about 2000sft with 55 ft road frontage on chittoor road near valanjambalam

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