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Rental Agreements in India

Indian rental market is unique. Rental agreements in India, are not just shaped by legalities but also by culture and social norms. While a common practice in most of the western world, rental agreements are still not widely used in India. In some Indian metros, people have started to understand the importance of rental agreements however, in most parts of the country; verbal agreements remain the standard procedure. In the good old days, a man’s word was everything and a verbal agreement usually accompanied with a person’s social and moral standing as his witness, was sufficient. However, times have changed. People have migrated thousands of kilometers from their home town. In a new city, where everyone is busy trying to fend for oneself; and, as people have become more self-focused, verbal agreements have sort of lost its standing.

Why do we need written rent agreements?

In this new age, a written rental agreement is critical. It’s a tool to protect both, the landlord and the tenant. A written lease provides a critical piece of evidence for the landlord that he (or she) owns the property and the person living in the property is merely renting the place. For the tenant, a written rent agreement provides protection against any dispute and unlawful financial demand by the landlord. A written rental agreement is especially important if the tenant is providing a security deposit. It acts as a written proof that security deposit was paid which is to be fully refunded by the landlord at the end of the rental duration. Vice-versa, a written rent agreement is critical for the landlord if he (or she) is not taking any advance as security deposit. In such a scenario, a landlord is protected against any unlawful demands of a financial reimbursement at a later date, by the renter.

What’s the common duration of a rental agreement in India?

Domestic rental agreements usually last for 11 months in India. Landlords usually prefer 11 month duration to avoid rental control laws. Rental control laws were signed by most state governments in India to protect the tenants from unfair eviction and overcharging by the landlord. You can learn more about Rental Control Laws here: http://india.gov.in

What should be included in a rental agreement?

A rental agreement in India should typically consist of:

  • Full legal name of parties, the landlord and the tenant.
  • Start and End date of the rent agreement.
  • Rent:
    • Rent amount per month.
    • Date on which the Rent has to be paid.
    • A penalty clause for late payment of rent, if any.
    • Medium of payment for the rent.
  • Extra Charges: what is included in the Rent?
    • Are the Utilities like electricity, water and gas included in the rent? If not, who is responsible for paying it?
    • Are the additional services like garbage collection, club membership fee (if any), society charges (if any), maintenance charges (if any), parking charges (if any), cable bill (if any) and landline phone bill (if any) included in the rent? If not, who is responsible for paying these bills?
  • Security Deposit: any security deposit paid by the tenant should be clearly mentioned in the rental agreement. It should also be mentioned that the deposit is to be fully refunded at the end of rental agreement. However, a landlord would like to include a “damage” clause which allows him (or her) to deduct an amount from the security deposit to pay for damages done to the property by the tenant during his (or her) occupation of the premises. This is a standard practice. A security deposit in western and southern parts of India can be as high as 12 months of rent. In northern and eastern parts of India, 2 months of rent is accepted as reasonable security deposit. A security deposit has to be paid in advance, usually before the tenant moves-in. Security deposit usually can’t be mixed or adjusted with the rent.
  • Standard conditions of renting the place clearly outlining how the tenant should behave and take care of the property.
  • Standard conditions of eviction by the landlord clearly outlining in which conditions the landlord has the right to evict the renter.
  • Notice Period should be clearly stated in the lease. If a renter has to empty the property before the rental agreement expires then how long in advance does he (or she) needs to provide a written notice to the landlord? Also, is there a “penalty” clause in such a scenario? If yes, then it should be clearly mentioned in the rental agreement. It’s common to have 30 days as notice period in lower rental properties. A 60 days’ notice period may be required in high rental properties.
  • Witnesses: a Rental Agreement should always be signed in the presence of at least two witnesses.
  • Sign and Date: any Signature on the Rental Agreement should always be accompanied with a date.
  • Addendum – condition of the property at the time of renting: although not a common practice in India, it’s a good idea to include an addendum to the rental agreement which clearly states the condition of the property; room-by-room; at the time of renting. It should be fully signed and dated by both the Tenant and the Landlord.

Preparing a Rental Agreement:

It is strongly advised that you work with your own legal representative, property agent or person of knowledge to draft a rental agreement. Your potential landlord may already have a Lease drafted for you. You can even find many rent agreement templates on the internet. There are also many online tools which allow you to create a rent agreement for a small fee; just do a Google search for it. I personally thought that this one was reasonable and easy to use: http://indiarentalagreement.com

Sample template of an 11-months Indian rental lease agreement is available for download here. Rental Agreement in India

Let us know which Rent Agreement Template or Online Rental Tool do you prefer? We are always eager to hear and learn from you. It enables us to create and share more accurate and relevant information with the wider community.

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