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    Everything You Need To Know About Commercial Subleasing In India 

    • 5 min read
    • Last Modified Date: March 25, 2024
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    In the last few years, the Indian real estate landscape, especially when it comes to real estate investment, has undergone a big shift, with many investors looking to move beyond traditional property ownership. The demand for flexibility and cost efficiency is always on the rise, causing alternative real estate investment options such as commercial subleasing and fractional ownership to come into the spotlight.  In this article, we will lead you through everything you need to know about commercial subleasing in india. 

    Understanding Commercial Subleasing 

    A Win Win Scenario

    Let’s say you ordered a large pizza for yourself and you’re having trouble finishing it. Now you don’t want it to go to waste, so you decide to share it with someone else. This is exactly how subleasing works in commercial real estate

    A company might end up renting more office space than it requires, so it ends up sharing it with another company so both of them can utilize the property space and save on costs.

    However, there’s a lot more to it. So let’s dive deeper. 

    Difference Between A Sub Lease And A Traditional Lease

    Businesses can choose between traditional leasing or opt for a sub lease when it comes to securing commercial real estate for their company. What’s the difference? 

    A traditional lease is one between a landlord and the tenant. A commercial sublease is between the head tenant (the original tenant) of the property and the sub-tenant, also known as the sub lessee. 

    Both the leases require approval of the landlord. However, some of the advantages of a commercial sublease include: 

    1. More Flexibility

    A commercial sublease is often shorter in duration than a traditional lease, providing more flexibility to the sub tenant or sub lessee. 

    1. Reduced Rent

    Commercial subleases usually involve lower rent than a traditional lease, since the main tenant of the property is also saving on costs by leasing out part of the property. The rental costs are specified in the sub lease agreement. 

    1. Lowered Rate Of Risk

    Due to the short term duration of a commercial sublease, it is the perfect situation for a company looking to test out the waters or setting up operations in a new city. 

    Saved from the hassle and technicalities of a traditional lease agreement, companies can tread carefully in new locations before committing to a long term rental agreement, all the while sharing risk with the main tenant or other sub tenants of the commercial property.  

    1. Networking Opportunities

    Sub leasing can also provide your business with opportunities for networking. After all, sharing company space with a complementary company can plant seeds for new ideas for growth, generate new leads, and expand your avenue of services. 

    Thus, sub-letting commercial real estate with a company in the same industry but one which provides different services, is a dream scenario, to boost revenue and marketability. 

    What’s The Catch?

    Now you might be wondering, it can’t be all sunshine and rainbows when it comes to commercial sub leasing, can it? 

    As with everything under the sun, there are some cons of sub leasing commercial real estate:

    Maintenance And Repair Time

    If something goes wrong, you should expect additional delays as more people stand in your way than in a traditional lease agreement. There you can simply approach the landlord and hash out the issues, things get slightly more complicated when the number of tenants increases. 

    Not Much Freedom To Modify The Space

    If you’re the only one renting a commercial property, you have full freedom to design, redesign, and renovate the property however you please. However, the majority of commercial subleases are rented out “as is,” so you won’t have the same flexibility to modify the space’s layout to better fit your needs, as you would if you had leased straight from the owner.

    Navigating The Legalities Of Commercial Subleasing In India

    Legal Framework Of Commercial Subleasing 

    A sub-lease agreement is backed by laws and regulations. In particular, the Transfer of Property Act, 1882. The aforementioned Act governs the transfer of property, including commercial property, and section 108 of TPA covers the sub-letting of commercial property. 

    One of the ways in which the TPA reduces risk is by protecting the rights of sub-tenants. For example, if the head tenant defaults on paying the rent on time, the subtenant cannot be evicted unless proper notice has been served by the landlord. 

    Compliance And Due Diligence 

    We, at Assetmonk, underline strong emphasis on legal compliance and due diligence when it comes to sub-leasing commercial real estate. Before ANY property is listed on our platform, thorough in-depth checks are conducted to ensure that the property adheres to all necessary legal requirements. This ensures that all the parties involved, including the sub landlords and subtenants, are in a position of ease and security. 

    Real Estate Trends: Is Commercial Subleasing The Future?

    As per CBRE’s Q3 report on India’s office figures: Office leasing activity in India climbed 17% quarter on quarter and 33% year on year to 15.8 million square feet in Q3 2023. Mumbai, Bangalore, and Hyderabad led the way, accounting for 60% of transaction activity during the quarter.

    In fact, banking, Financial Services and Insurance (BFSI) enterprises had an increase in leasing activity and paved the space take-up in Q3 2023, followed by technology corporations, engineering and manufacturing (E&M) firms, and life science firms.

    Based on commercial real estate trends, the demand for commercial real estate has only been increasing, and sub leasing has helped meet this demand. In a real estate market which is constantly changing, sub leasing allows firms and companies to meet these changes by being flexible, and having a greater number of options when it comes to properties, tenants and landlords. 

    Assetmonk: Your Gateway To Alternative Real Estate Investment

    As the commercial real estate environment evolves, it is clear that subleasing is more than just a fad; it is a purposeful option adopted by organisations seeking flexibility and cost-effectiveness. Assetmonk is, and will be, a crucial participant in influencing the future of commercial subleasing in India.

    Assetmonk is committed to providing alternative real estate investment models such as fractional ownership and co-ownership of commercial real estate property. By providing its investors the opportunity to own shares in high end commercial properties, Assetmonk is doing its part to ensure that the benefits of real estate investment are accessible to a wider range of individuals and businesses. 

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