Buying a Pre-Leased Commercial Property in Chennai: Yield, Lease and Tenant Checks

Quick links: Rental yield · Checking the lease · Checking the tenant and building · Loans · Tax · FAQs · Sources

A pre-leased property is a shop, office or other commercial unit sold with a tenant already in place and paying rent. You start earning from the day you buy. But the rent is only as good as the lease behind it and the tenant paying it, so those are what you're really buying.

This is general information, not investment or tax advice. Consult a lawyer and a chartered accountant for your specific purchase.

How to calculate rental yield

Gross rental yield = annual rent ÷ purchase price × 100 (Housing.com). For a real comparison, use net yield: deduct maintenance costs and property tax from the rent, and add stamp duty, registration and other purchase costs to the price.

Stamp duty is charged on the guideline value or the price, whichever is higher. See our stamp duty guide. Try the numbers for your property in our Rental Yield Calculator.

A high yield isn't automatically a good deal. Housing.com notes that a pre-leased property can sell at a premium over a vacant one, and that high rent alone doesn't justify buying. Check whether the rent is in line with similar spaces nearby.

Checking the lease

• Remaining term: how many years are left, and is there a renewal option?
• Lock-in: how long the tenant can't leave, and the penalty if they do. Housing.com notes the penalty is usually rent until the lock-in ends.
• Escalation: the rate and frequency of rent increases.
• Security deposit: the amount, and confirm it will be transferred to you on purchase, since you'll owe it back at the end.
• Who pays what: maintenance, property tax and repairs.
• Registration: check the lease is registered and, in Tamil Nadu, registered with the Rent Authority. The Tamil Nadu tenancy law covers premises let for commercial use.
• Assignment: the lease should continue with you as the new owner. Ask your lawyer to confirm.

Checking the tenant and the building

• Tenant quality: a bank, a listed company or an established chain carries less risk than a new business. Ask for rent payment records.
• Fit-out investment: Housing.com notes that a tenant who has spent heavily on interiors is more likely to stay.
• Building occupancy: if the tenant leaves, a well-occupied building is easier to re-let (Housing.com).
• Title and approvals: the same checks as any commercial purchase. See our shop and office buying checklist.

Loans against rent

Lease rental discounting (LRD) is a term loan for commercial property owners against the rent the property earns. Tenants pay rent into an escrow account and the lender takes its repayment from it. As an example, Godrej Capital says it sizes the loan on the present value of expected rent, offers tenures up to 15 years and lends up to 70% of property value. Terms vary by lender.

Tax on the rent

• Income tax: rent is taxed as income from house property. Under the Income-tax Act, 2025, the annual value is reduced by municipal taxes the owner actually paid (section 21), and a deduction of 30% of the annual value is allowed, plus interest on a loan taken for the property (section 22).
• TDS: a tenant paying rent above ₹50,000 a month deducts TDS at 10% for land and buildings, under section 393(1) of the 2025 Act (individuals and HUFs not subject to tax audit are generally exempt) (TDSMAN).
• GST: commercial rent attracts 18% GST. See our guide for landlords.