Leasing

Lock-in and escalation: reading the term sheet

The two clauses that decide what a Chennai office lease really costs, with the deposit, notice and GST around them.

Updated 20 Oct 2026By S N Enterprises5 min read

In short

Lock-ins of three to five years are usual for Grade A offices (shorter for small ones); leave early and you usually pay the rent for the rest of the lock-in.
Rent rises about 15% every three years, or 4–5% every year. The step every three years is cheaper: over six years it costs about 3–5% less in total.
Deposits run 6–12 months for Grade A offices; above three months must be written into the agreement.

In this guide

The lock-in
Escalation
Deposit and notice
GST and who pays what
Questions

The lock-in

The lock-in is the stretch neither side may end the lease. For Grade A offices it's typically three to five years, shorter for small offices. A tenant who leaves during it usually owes the rent for the rest of the lock-in. After it, either side can usually end the lease on three to six months' notice (market practice in SNE's experience; no published figure).

Ask for the lock-in to match how sure you are of your plans, not the full term: a five-year lease with a three-year lock-in is common in SNE's experience.

Escalation

Many Chennai office leases raise the rent up to 15% every three years (a 2019 Chennai tech-park lease, later filed with the US SEC, does exactly this); others raise it every year instead, at around 4–5%.

On a rent of ₹1,00,000	After 3 years	After 6 years
5% every year	₹1,15,763	₹1,34,010
4% every year	₹1,12,486	₹1,26,532
15% every 3 years	₹1,15,000	₹1,32,250

Check whether escalation applies to maintenance (CAM) and car parks too; the agreement decides.

Deposit and notice

Grade A offices ask 6 to 12 months' rent as a refundable deposit; two recent Chennai tech-park deals settled at about six. Tamil Nadu's tenancy law makes a deposit above three months lawful only if the agreement says so, so make sure it's written in, with when and how it comes back.

GST and who pays what

GST at 18% applies to commercial rent when the owner is GST-registered.
Since 10 October 2024, when an owner who isn't registered rents to a GST-registered business, the tenant pays the GST under reverse charge (composition taxpayers were taken out of this from 16 January 2025).
Stamp duty and registration are usually paid by the tenant: see registering a commercial lease.
TDS: a business tenant deducts 10% income tax at source on rent above ₹50,000 a month (Income-tax Act 2025, s.393; formerly s.194-I).

Rent-free months for fit-out and the level of maintenance charges vary building to building; there's no reliable Chennai benchmark, so ask for both in writing. The move-in cost calculator adds up the first payments.