{"id":25581,"date":"2021-02-06T12:24:46","date_gmt":"2021-02-06T06:54:46","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=25581"},"modified":"2021-02-06T12:24:50","modified_gmt":"2021-02-06T06:54:50","slug":"pros-and-cons-of-commercial-lease-agreement-in-india","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/pros-and-cons-of-commercial-lease-agreement-in-india\/","title":{"rendered":"What are the Pros and Cons of Commercial Lease Agreement in India?"},"content":{"rendered":"\n<p class=\"has-drop-cap\">When you look for a commercial property, you may wonder if it would be worthwhile to lease the space. However, in the beginning, when you think about leasing it, you surprisingly miss the trivial aspects of leasing work, and there it causes errors in all the coming events. Therefore, it is safe and wise as an investor to be careful of qualifications and demerits to avoid any obstacles and enjoy uninterrupted transition, where you can protect your interests. Commercial lease agreement is mandatory to lease a property in India.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/pros-and-cons-of-commercial-lease-agreement-in-india\/#Commercial_Properties_for_Leasing\" >Commercial Properties for Leasing<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/pros-and-cons-of-commercial-lease-agreement-in-india\/#What_are_the_Advantages_of_Leasing_with_Commercial_Lease_Agreement\" >What are the Advantages of Leasing with Commercial Lease Agreement?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/pros-and-cons-of-commercial-lease-agreement-in-india\/#Disadvantages_of_Leasing\" >Disadvantages of Leasing<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/pros-and-cons-of-commercial-lease-agreement-in-india\/#Commercial_Lease_Agreement_versus_Rental_Agreement\" >Commercial Lease Agreement versus Rental Agreement<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/pros-and-cons-of-commercial-lease-agreement-in-india\/#Concluding_Remark\" >Concluding\nRemark<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Commercial_Properties_for_Leasing\"><\/span>Commercial Properties for Leasing<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A landlord gives a property to any tenant in a commercial lease agreement,\nprimarily to conduct a business activity. Commercial properties used for lease\ninclude office space, retail space, restaurants, industrial buildings and\nwarehouses.<\/p>\n\n\n\n<p>However, it also includes some other properties, such as none of the places for residential purposes such as self-storage facilities, recreational facilities, medical clinics, etc.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_Advantages_of_Leasing_with_Commercial_Lease_Agreement\"><\/span>What are the Advantages of Leasing with Commercial Lease Agreement?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/02\/What-are-the-Advantages-of-Leasing-with-Commercial-Lease-Agreement.png\" alt=\"Advantages of Leasing with Commercial Lease Agreement\" class=\"wp-image-25622\" width=\"398\" height=\"540\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/02\/What-are-the-Advantages-of-Leasing-with-Commercial-Lease-Agreement.png 664w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/02\/What-are-the-Advantages-of-Leasing-with-Commercial-Lease-Agreement-221x300.png 221w\" sizes=\"(max-width: 398px) 100vw, 398px\" \/><\/figure><\/div>\n\n\n\n<p><em><strong>Listed below is the advantages commercial lease agreement in India<\/strong><\/em><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Preservation\nof Ownership<\/h3>\n\n\n\n<p>In a lease, the lessor transfers all risks and makes a contingent award\nfor ownership to the lessee without transferring ownership of the specified\nproperty. Therefore, the asset is owned by the lessor.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Benefit of\nTax<\/h3>\n\n\n\n<p>As the asset owner lies with the lessor, benefit of the tax-benefit is\nclaimed by the buyer to receive concessions under the Income Tax Act.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Growth\nPotential <\/h3>\n\n\n\n<p>The demand for leasing is constantly increasing as it is one of the cost-efficient forms of financing. Furthermore, by leasing, <em><strong>economic growth<\/strong><\/em><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Economic_growth\"><em><strong>[1]<\/strong><\/em><\/a><\/sup> can be maintained even during the depression of the same. Thus, given this, leasing may lead to greater growth than other forms of business.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Quicker\nReturns<\/h3>\n\n\n\n<p>By leasing a property, the lessor can get quicker returns in the form of\nlease rentals than investments in other projects with a more extended period of\ntime to earn returns.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Capital\nAppreciation<\/h3>\n\n\n\n<p>Leasing is beneficial to the property owner because the underlying\nproperty appreciates in the price continuously over time. As a result, the\nlessor may for some time take advantage of the capital appreciation of the\nsupport.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Gain of\nSalvage Value on the Asset<\/h3>\n\n\n\n<p>Salvage value is the price of an asset that is after depreciation, at the\nend of its useful life. The lessor, being the support owner, can realize the\nsettlement value at the end of the tenure of the lease. You can enjoy rental\nreturns during the rental period and later the salvage value.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Disadvantages_of_Leasing\"><\/span>Disadvantages of Leasing<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><em><strong>The points discussed hereby are the demerits of commercial lease agreement, which are as follows:-<\/strong><\/em><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Long-Term\nInvestment<\/h3>\n\n\n\n<p>Recovering the lower cost of a property by a means of leasing such\nproperty for rentals on the capital layout plan will definitely take a long\ntenure period. Therefore the rent value of such property received by the lessor\nshall not show the actual gain because of some inherent risks.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Management of\nProperty and Cash Flows<\/h3>\n\n\n\n<p>The leasing out of any property can touch the success surely depends on\nthe maximum usage of cash flows, which somehow gets difficult to manage and control\ndue to unexpected fluctuations in markets. Thus, in reality, you must possess\nthe skills and the technique to manage the asset for more and more efficient\ncash flows.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">High-Risk of\nObsolescence<\/h3>\n\n\n\n<p>In keeping an eye&#8217;s&nbsp;on the knowledge of the market&nbsp; &nbsp;changes\non&nbsp;preferences and needs, there have been findings in the drastic shift in\ninfrastructure and outlook of properties. Being an owner of assets, the lessor\nmight bear the risks of obsolescence on wear and tear or on outdated\nand&nbsp;rapidly changing technologies. <\/p>\n\n\n\n<p>You must be familiar with the market updated trends to get rid of such\ndifficulties and can easily avoid the risks of obsolescence by making\ninvestments in updated trending commercial properties which gained traction\nsince times and not let you down.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Price-Level\nChanges<\/h3>\n\n\n\n<p>Generally, agreement once executed, cannot be changed in its tenure. Despite\nthe increase in the property price due to inflation, the lessor receives only\nfixed rent based on past costs.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Damage of the\nAsset<\/h3>\n\n\n\n<p>On\nleasing out any property for a while, its ownership cannot be transferred. Its\nrights of possession could be shared indeed. Thus, it might be a possibility of\nusing such asset with a careless attitude by the lessee which further results\nin non-reusable&nbsp;of the asset after the expiration of primary lease\ntenure.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Commercial_Lease_Agreement_versus_Rental_Agreement\"><\/span>Commercial Lease Agreement versus Rental Agreement<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><em><strong>Both the commercial lease agreement &amp; rental agreements have their inherited merits and demerits.<\/strong><\/em><\/p>\n\n\n\n<ul><li>Rental agreements empower the landlords to rent out their properties that not desirable for the long term. <a href=\"https:\/\/corpbiz.io\/commercial-rental-agreement\"><strong>Rental agreement<\/strong><\/a> has the advantages for the landlords to re-draft or negotiate the terms of an agreement on a quick increase in rent value. It also gives benefits to tenants who stay in a certain place during a transition or they are unsure for&nbsp;duration to stay and uncertain about how long they would live in certain specific areas.&nbsp; <\/li><li>The Commercial lease agreement is advantageous to a landlord by providing the stability and guaranteeing a long-term income. Lease agreement is profitable for a&nbsp;tenant as it locks in the rental amount and length of the lease period which further could not be changed even the property or rent values rise next month.<\/li><\/ul>\n\n\n\n<p>Both\nthe leasing and monthly rental agreements have their advantages and disadvantages.\nThe rental agreement allows landlords to rent properties that may not be\ndesirable to long-term tenants. Commercial lease agreement is also beneficial when the rental\nvolume can increase quickly, allowing the landlord to re-apply the terms of the\nmonth-to-month agreement.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Concluding_Remark\"><\/span>Concluding\nRemark<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>There is no doubt, that the renting commercial real estate or retail\nproperty is a good investment strategy. However, as a lessor, you need the\nskills necessary to work extensively with tenants. Therefore, understanding the\ntypes of leases, qualities and demerits that you have as an underperformer can\nincrease your chance of success in the real estate sector. <\/p>\n\n\n\n<p>In addition, knowing the benefits and implications becomes an essential part of a commercial lease agreement. You can disclose the facts and avoid any interruption while the property is leased to the lessee. Kindly associate with the <a href=\"https:\/\/corpbiz.io\/\"><strong>Corpbiz<\/strong><\/a> expert to know more about the commercial lease agreement in India<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/important-facts-related-to-commercial-lease-agreement\/\">What are the Important Facts Related To Commercial Lease Agreement?<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>When you look for a commercial property, you may wonder if it would be worthwhile to lease the space. However, in the beginning, when you think about leasing it, you surprisingly miss the trivial aspects of leasing work, and there it causes errors in all the coming events. Therefore, it is safe and wise as [&hellip;]<\/p>\n","protected":false},"author":32,"featured_media":25621,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[438],"tags":[1509],"acf":{"service_id":"69"},"authorName":"Komal Singh","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/12\/processed.jpeg","authorDescription":"Komal Singh is a Legal scholar, having diverse experience in scripting research papers, articles &amp; dissertations, which serves her main interest &amp; competent in drafting legal documents. She has polished her skills in dealing with the matter related to consumer affairs and now building intelligible Legal Content for Corpbiz.","postViews":8754,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/25581"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/32"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=25581"}],"version-history":[{"count":8,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/25581\/revisions"}],"predecessor-version":[{"id":25625,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/25581\/revisions\/25625"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/25621"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=25581"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=25581"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=25581"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}