Rental Agreements, Leases and Regulations in India

Understand the key components of a tenancy lease or rental contract, and the regulations that you need to be aware of as a tenant or landlord…

Rental leases generally last for 12 months, although many landlords opt for an 11 month lease to avoid rental control laws (see below). Rental leases can usually be easily extended or shortened if negotiated with the landlord in advance. Most rental leases require a minimum occupation period equivalent to the length of the lease. Landlords will usually ask for a security deposit of up to 3 months’ rent, which will then be fully refunded when the rental lease expires and the accommodation is left in good condition. The deposit is paid is usually paid once a lease agreement is signed. To protect against fraud and ensure return of the security deposit, the tenant should get the terms in writing and a receipt from the landlord. If the tenant vacates a property early, the landlord should be given two to three months’ notice, or as stated in the rental agreement. Landlords will usually expect the tenant to either pay the remaining months of the lease or forego the security deposit. A tenant can choose not to opt for a written rental agreement and be given the freedom to leave at any time, at the risk of losing the security deposit.

Paying the Rent

Rent is usually paid with cash or a cheque issued by an Indian bank. Bank transfers are not common in India, and most landlords do not accept this as a form of rent payment. Paying guest, serviced apartments and other short-term accommodation is paid for on a daily or weekly basis. Long-term accommodation is almost always paid monthly.

Utilities

Landlords often include essential utility connections such as gas, electricity and water in their rental agreements. A landlord may include the rate in the monthly rent, or if an electricity connection only is included, then it is the landlord’s responsibility to provide the electrical card with the meter readings for the tenant to pay separately. The same applies for water connections, depending on whether the accommodation is supplied with public water or groundwater from private bore wells. For a gas connection, it is the landlord’s responsibility to provide gas cylinders. Phone, television and Internet connections are not usually provided by landlords. They are the tenant’s responsibility.

Other Regulations

Sometimes a landlord will include certain lifestyle restrictions in a rental lease. The most common, especially in south India, is that non-vegetarian food cannot be prepared in the accommodation. Subletting is not permitted unless with the landlord’s written consent. In most cases, such terms and restrictions in a rental lease can be easily negotiated with the landlord. Landlords often take marital status into consideration when screening potential tenants.  Bachelors and unmarried women may find it difficult to find accommodation without another person’s formal recommendation or testimony of good character. Accommodation specifically for bachelors is listed in print and online. Many landlords are still reluctant to rent accommodation to single women regardless of nationality. A landlord may try to evade income tax payments and rental control laws by insisting on a verbal or informal agreement without an official rental lease. Accepting an informal rental agreement makes it extremely difficult to get official proof of residence. For new immigrants into India, a written rental lease is often the primary proof of residence used to obtain basic necessities like a Permanent Account Number (PAN Card), electricity, water, gas, phone and Internet.

Rental Control Laws

Rental control laws have been passed by each of the Indian state governments to prevent landlords from overcharging tenants and to protect tenants from sudden or unfair eviction. New laws have been proposed which will allow landlords to charge rents that is to be decided by respective state governments which are on a par with market rates. States would also have the power to put a cap on rent rates to check arbitrary hikes. Current laws set a maximum rental rate and outline the specific circumstances in which a tenant can be evicted, such as subletting without permission, failure of payment or poor maintenance of the accommodation. Landlords must abide by these strict laws when they rent accommodation with a 12 month lease. Most landlords avoid rental control laws by either drafting 11 month leases or encouraging informal or verbal rental agreements. For a tenant with a 12 month lease, a rent rate at or below market value is guaranteed. But it may be difficult to break the terms of the lease should the tenant have to leave early. An 11 month lease gives both landlord and tenant more flexibility. The landlord can set the rent and terms according to the current market, and the tenant is less bound by the lease.