Commercial Lease Terms in Bengaluru: Deposits, Lock-ins, Escalations and Rent-Free Periods

Two spaces with the same monthly rent can cost very different amounts over five years. The difference sits in the clauses: the deposit, the lock-in, the escalation, the rent-free period and who pays for what. Here is how each one works in Bengaluru, and what to watch for on either side of the table.

Security deposit

Bengaluru deposits are high by national standards. Across the high-street spaces we currently represent, deposits run from 6 to 11 months’ rent, with 10 months the most common. Malls and tech parks often ask for less, but add maintenance deposits.

The deposit is usually interest-free and refundable at the end of the lease, after deductions for damage or dues. For a brand, it is cash locked up for years, so it is worth negotiating: a lower deposit in exchange for a slightly higher rent, or a deposit paid in two parts, is often possible with a strong tenant.

Lock-in and tenure

The lock-in is the period during which neither side can end the lease without paying the rent for the remaining months. The tenure is the full length of the lease, usually with a renewal option.

For F&B and retail, lock-ins of two to three years and tenures of five to nine years are normal, because fit-out costs need time to recover. Brands should keep the lock-in as short as the landlord will accept; owners should match it to how much they are investing in the space.

Escalation

Rent rises during the lease, most often either about 5% a year or 15% every three years. Over a nine-year lease, the difference between those two structures is real money, so model both.

Check what the escalation applies to. It should be the base rent only, not maintenance charges or the deposit, and the renewal terms should say whether rent resets to market or continues on the same escalation.

Rent-free and fit-out period

Most brands need time to fit out a space before they can trade. A rent-free period of one to three months is common for F&B and retail, longer for large or bare-shell spaces. Agree when it starts (on handover of the keys, not on signing) and what happens if the landlord’s own works are late.

Who pays for what

• Maintenance and common area charges in malls and complexes, often revised every year.
• Property tax, usually paid by the owner.
• Power and water: the meter, the sanctioned load and who pays to increase it.
• Repairs: structural repairs normally sit with the owner, internal ones with the tenant.
• GST: rent on commercial property attracts GST at 18% when the landlord is registered. Confirm whether the quoted rent includes it.
• TDS: business tenants usually deduct tax at source from rent above a threshold. Agree how it is shown in the lease so the owner is not surprised.

Registration and stamp duty

A lease for more than a year must be registered, which is why so many short agreements are written for 11 months. Commercial leases are longer and should be registered. Stamp duty is calculated on the rent, deposit and any premium, so agree in the lease who pays it, usually the tenant or split between the two.

Clauses that save arguments later

• Signage rights on the frontage and any approvals needed.
• Assignment and subletting, important for franchise brands and group companies.
• Exclusive use, so a mall cannot let the next unit to a direct competitor.
• Exit on licence failure, letting a brand walk away if a key licence is refused.
• Handover condition, with a written list of what the owner will deliver.

Negotiating it well

Every clause is a trade. A brand that wants a lower deposit can offer a longer lock-in; an owner who wants a higher rent can offer a longer rent-free period. Our desk negotiates these terms every week, on both sides. Brands can brief us here, and owners can see which brands are looking. If you are buying a property that already has a tenant, read how to judge a pre-leased property.