How to calculate rent on commercial property in India?

In India, if you own a commercial property in a good locality then you are most likely to earn good yields off of it provided you let it out on rent. For those who are already a step ahead and have bought commercial property, it is important to know how to calculate rent on commercial property. In this answer, I will take you through various aspects of commercial property renting and let you know how to calculate rent for commercial property.

Before determining the rental price for commercial property, you must know a few factors that impact the rental prices.

These factors are:

• Locality of your property

• Usable and rentable area in the property

• Type of lease/contract

• Furnishings of your property

• Market trends and prices

To calculate rent for commercial property in India you will need to apply the following formula:

Commercial Rent = (usable square feet x usable square feet rate per month) + (common area x common area rate per month)

For example,

A commercial property has usable area of 50 square feet and common area is 20 square feet. The landlord expects the rent for usable area around Rs. 200 per sq ft, whereas for common area, he expects the rent around Rs. 100 per square ft on a monthly basis, therefore, the total commercial rent for 1 month would be:

Commercial rent = (50 x 200) + (20 x 100)

Commercial rent = (10000) + (2000)

Commercial rent = Rs. 12000 per month

I hope now you know how to calculate rent on commercial property in India.

Hello Sarvansh, I can share details regarding the calculation for rent per square foot commercial property in India. I know the old but easy method through which rent is calculated for commercial properties. Let me share all the details regarding the same with you.

How to Determine Commercial Rent?

One of the methods used for rent calculation for a long time is the usable square feet one. In such a method, the tenant and property owners make agreements about the base rental rates, which are dependent on the business type and other factors. 

They then calculate the final payable rent, which varies based on the total usable square feet or the area used by the tenant. So, the more the area being used, the more would be the rent.

I think it would be helpful if I shared an easy formula for the rent calculator as well. It goes something like this,

This is all I have to share with you regarding how do I calculate commercial rent. I hope you find this helpful.

Hello Sarvansh, I can share details regarding the calculation for rent per square foot commercial property in India. I know the old but easy method through which rent is calculated for commercial properties. Let me share all the details regarding the same with you.

How to Determine Commercial Rent?

One of the methods used for rent calculation for a long time is the usable square feet one. In such a method, the tenant and property owners make agreements about the base rental rates, which are dependent on the business type and other factors. 

They then calculate the final payable rent, which varies based on the total usable square feet or the area used by the tenant. So, the more the area being used, the more would be the rent.

I think it would be helpful if I shared an easy formula for the rent calculator as well. It goes something like this,

This is all I have to share with you regarding how do I calculate commercial rent. I hope you find this helpful.

Hey,

Knowing how is rent calculated for commercial property is necessary if you wish to stay one step ahead of landlords. The price of each property varies depending on the type, location, use and size. Keeping all the factors in mind, I have collected data from popular commercial sites to compile the answer. 

You can determine the price on the following factors:

You can determine the price by checking the number of floors in the property. Landlords can charge as much as the value of the place if the commercial property has a working elevator. 

A property with storage space is practical and highly desirable. The storage space can be converted into a dressing room, office or a miscellaneous room as well. Any property with storage space will be more expensive. 

You will need to look at the cost, sale price and monthly rental price of properties in the neighbourhood. This will help you understand the average cost of properties in that place. You can assume the rental value of your commercial property will be similar, if not the same.

Here's how I calculate commercial property rent per square foot:

I make the calculation of rental value in square feet. 

1. There is a 3-room commercial shop with 1500 Sq Ft of built-up area and there’s a 2-room shop nearby with 1000 Sq Ft, renting it out for Rs 12,000 per month, the calculation would be Rs 12,000 / 1000 ft = Rs 12 per sq Ft.

So this would mean that the 3 room property is 1500 Sq Ft, which will be 1500 * 12 = Rs 18,000 per month

I hope my explanation of how is rent calculated for commercial property is helpful.

Any retail business's new best friend is a commercial lease. You can create an ongoing contract that benefits both the landlord and the tenant significantly instead of buying a commercial space or leasing it on a monthly basis. But for this, you must know

how rent is calculated. I will help you understand this.

How much rent to charge for commercial property?

The majority of people are intimidated by the commercial rent calculation for commercial real estate, mostly due to the variables involved. The monthly rent varies depending on whether you are on a Net lease, a double net lease, a triple net lease, a gross lease, or a percentage lease.

Everyone uses the following basic formula to determine commercial rent:

Rent = (Usable Square Feet x Usable Square Feet Rate Per Month) + (Common area x the rates per month for this type of area).

Factors affecting commercial property rent rates 

• The location has a significant impact on rent prices and capital growth. Naturally, areas with established tenants will have higher rents in areas with vacancy rates below 5%.

• In comparison to comparable properties in the same neighbourhood, buildings and properties with greater facilities, fit-outs, LEED as well as other ratings/certifications, superior elevators/lobbies, greater ceiling heights, stunning views, and superior quality construction will automatically have higher rentals.

• In certain micro markets, demand and supply dynamics also affect rental rates. Each region has its own finished and rented stock in addition to forthcoming supply. The other component of the system is annual demand. Rental prices decline if rental supply exceeds demand. If supply cannot keep up with demand, the opposite occurs.

• Long-term influences on rents and property values include market trends, infrastructure improvements, the availability of public transit and social facilities, and even tenant quality.

• Workplace fit-outs and other commercial spaces are frequently offered in bare-shell formats, where tenants are responsible for everything from flooring to conference rooms, wiring, cubicles, and more. While some renters prefer to complete their own fit-outs, others prefer to work with developers or owners and pay an additional rental fee. These cost Rs 800-1,000 per square foot. Builders or owners may add an additional Rs 25–30 per square foot each month to pay these expenses.

• Rental costs are also based on the lease structure. Commercial leases typically consist of 5+5+5 or even 3+3+3 agreements. Every three or five years, there are escalation terms for rent.

These are some considerations you should make when figuring out how much to charge for any commercial property.

Now you know a few more details regarding

how rent is calculated and what factors affect it.

Giving an empty space on rent is the best way to earn money and also make use of the abundant property. However if you do not know the market value, you can be tricked and even suffer loss. My grandfather used to rent a commercial property for quite a cheap price and later when he asked the tenant to increase the rate, he not only denied but also started claiming the property which led to a lot of chaos. It is thus nowadays better to go in contract and then only sanction the rent on commercial property. But do you know

how to calculate rent per month and what factors determine it? If not, get to know about it all here

Since you must have read the factors that determine rental prices, you should also be knowing the formula for commercial rent calculation which is:

= (Usable sq ft * usable sq ft rate each month) + (common area * the rates per month for this type of area)

= monthly rent/ floor space (ft^2)

Now if you think that you are able to provide more facilities, your property is more decorative or spacious and more then you can opt for increasing the rent but do remember that your rent must not be too high than the rent fee that other landlords in your area are asking for or it can ruin your name. Too cheap properties also fail to attract customers as they think that if the rent is so low, there must be some defects in that property. It is better to know the rent fee of yor area and then go for further calculations.

I hope these will help you to know

how to calculate rent per month more accurately.

Read More: