How much Deposit for Commercial Property?

It is very important that you know about the average security deposit for commercial property or even residential property. I have been planning to start a business of my own, and for a few years, I have been researching tenant rights, deposit amounts, average rent, and other factors. I had a detailed consultation with a legal expert from NoBroker and could understand a lot of things on this subject. Since you are curious about the commercial property security deposit amount, let me share what I know about it.

What Amount of Deposit Needed for Commercial Property?

The Union Cabinet approved the Model Tenancy Act on June 2, 2021, and as per this act, the tenant is bound to submit a

. So if the rent of your commercial property per month is Rs 1 lakh, your security deposit will be Rs 6 lakh. So this is the amount of deposit required for commercial property. 

In case you are wondering what the deposit amount is to avail of a commercial property loan, learn that the commercial lenders might require a down payment of 20% to 30% or more. It varies from one bank or lender to another so you should visit the concerned office and verify. I am planning to verify all my rental documents from NoBroker once I finalise things and I would suggest you get it done too.

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Renting a commercial property is a good idea to expand a business. Our office recently shifted to a new place, and the rent was around Rs 4 lakh per month. The space was really cool, so I really wanted to know how much deposit for commercial property is to be given. I too dream of having my own business, so knowing these facts will be really helpful for me in the future. If you have a similar plan, know here how much deposit do you need for a commercial property so that you can negotiate with the landlord if the need arises.

The answer to how much deposit needed for commercial property is not going to be straightforward. There are a number of factors that are considered while deciding the deposit, and they are-

Location plays an important role in property renting. If a property is located on the main road, its demand will be high. People will be ready to pay a huge amount of money for it. But if the property is in a remote area, the demand for it will drop. The more demand, the higher the deposit. 

A small-sized company usually does not ask for a large amount of money as a deposit, as most people look for spacious commercial properties. In such cases, the deposit amount gets quite low. But it might not always be the case. If the space is well-equipped, lit and enjoys a great location, people will come for it, and the deposit amount can increase in such a case.

The deposit amount is decent if you rent a property for business. But if you rent a commercial space for restaurants, shops, bars, or more, the deposit amount will increase. 

Other factors that also affect the deposit amount are

• Connectivity of the property 

• Amenities that the property enjoys

• Whether the property is located near restaurants, malls, and more

But do note that, as per the Model Tenancy Act of 2021, the security deposit should not be higher than six months' rent. For example, if your rent is Rs 1 lakh per month, your deposit amount can go up to Rs 6 lakh (the maximum). Usually, the deposit amount remains between 2-3 months’ rent, but this solely depends on the owner. 

This answer should be enough to give you a clear idea of how much deposit for commercial property in India.