Prerequisites
- ✓Identified property and engaged with the owner
- ✓Indian legal counsel with coliving experience
- ✓Operating budget and projected revenue model
TL;DR
Master lease 5–9 years, 5%/year rent escalation, lock-in period 12–18 months, exit/early-termination clauses, performance triggers. Standard Indian master lease is governed by the relevant state's Transfer of Property Act + tenancy law. Stamp duty applies on the lease (varies by state, typically 0.25–1%).
Step-by-step
- 1
1. Decide lease term + lock-in
5 years base + 1–2 renewal options is typical. 12-month lock-in protects landlord; 24+ months is operator-aggressive. Negotiate based on capex you're putting in.
- 2
2. Set rent escalation clause
Typical: 5% annually. CPI-linked (with 4–6% floor and ceiling) is more landlord-favorable; flat 5% is more operator-favorable. Bake into 5-year cash flow.
- 3
3. Define rent-free / rent-discount period
Typical: 30–60 days fit-out grace period. 60–90 days for major refurb. Push for 90–120 days if substantial conversion required.
- 4
4. Insert force majeure + government-action clauses
Specifically include 'PG licence revocation by BBMP' and 'fire NOC withdrawal' as triggers. Post-2023 Bengaluru enforcement makes these meaningful.
- 5
5. Negotiate performance triggers
Operator-favorable: minimum revenue performance triggering rent reduction in case of regulatory action. Landlord-favorable: minimum maintenance + repairs triggering rent escrow.
- 6
6. Specify capex split
Tenant typically pays for fit-out + ongoing improvements; landlord pays for structural + roof + foundation. Document explicitly.
- 7
7. Pay stamp duty and register
Karnataka stamp duty on long-term lease: typically 0.5% of total rent over the term. Registration mandatory. Cost ₹15k–₹50k typical.
Common issues + fixes
×Landlord wants flat 7%/year escalation
→Counter with 5% flat or CPI-floored at 4%. Use comparables — Stanza, Colive lease at 5%. Show landlord that 7% leaves no margin for operator capex amortization.
×Lock-in beyond 24 months
→Lock-in beyond 24 months is operator-hostile in Indian context. Counter with shorter lock-in + higher early-termination penalty (if needed).
×Force majeure too narrow
→Standard FM clauses don't include regulatory shutdowns. Add explicitly: 'PG licence revocation', 'BBMP closure orders', 'GST regime change > 5pp'. Without these, regulatory shock = full rent obligation while operations halt.
Frequently Asked Questions
What's a typical master lease length in India?
5 years base + 1–2 renewal options of 3 years each. Stanza Living + Colive standard.
Can I sublet rooms under the master lease?
Yes — that's the whole point. The master lease grants the operator the right to sublet to coliving tenants. Spell this out explicitly to avoid landlord later claiming subletting wasn't authorised.
What happens if I want to exit early?
Standard early-termination penalty: 6–12 months' rent. Some leases include a 'redeployment clause' — if you find another tenant for the property, no penalty. Worth negotiating.
Regulatory deep-dive
India regulatory deep-dive →