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A rental agreement is an official contract signed between the owner of a property and the tenant who wishes to take temporary possession of the property for a said period of time. Also called a rent deed and lease deed, a rental agreement contains basic details of the residential property, the owner of the property, the renter (or tenant, as he is also called), the term of the rental, and the amount of the rent for the said term.



The rental agreement or rental contract is drafted on a stamp paper. There are 2 types of rental contracts in India, one being a lease agreement that lasts for a minimum of 12 months. This is governed under Rent Control Laws put up by the State government. The other type is a lease and license agreement of up to 11 months which doesn’t fall under the Rent Control Laws.

How is rent fixed on a property?

Rent or the fixed amount of money to be paid on a monthly basis by the tenant to the landlord is determined by factors such as the market price of the property, cost of construction incurred, and construction time taken.

Details mentioned in the rental agreement are:

A rental agreement states the purpose of housing tenure, details of parking space, electricals and furnishing that are already there on the property. Importantly, it states if the whole or portions of the property are to be used for business, residential, agricultural, institutional, or governmental use. After the end of the tenure, the landlord must renew or cancel the contract. Usually, the landlord can increase the rent by 5 or 10% at the time of renewal.

Security deposits:

In India, security deposit or advance is also paid by the tenant to the landlord which is to be repaid at the time of cancellation of the contract. Usually, it is calculated anywhere from 2 or 3 months to up to 10 months of the rent. Security deposits are given at the time of signing the contract.

A part of the security deposit can be used by the landlord towards any damages caused to the furniture, appliances, electrical, or the property itself, by the tenant. After deducting the security deposit towards damages, the landlord is to return the remainder of deposit to the tenant, at the time of cancellation of the contract.

How is a rent collected?

The tenant can pay the rent to the landlord in cash, bank transfer, or cheque. The tenant can use HRA Allowance of the Income Tax Act to save on taxes that he is paying every month to his landlord.

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