The short answer
When you buy a pre-leased unit, the income is only as good as the lease and the tenant behind it. A high rent with one year left and no lock-in is worth much less than a lower rent locked in for years with a tenant that can pay.
Work out a net yield on your total cost, assume the tenant will leave at the first opportunity, and ask what the unit would be worth empty. If the deal only works with the current tenant staying for ever, it is a bet on that tenant.
Step 1: read the whole lease
1. The tenant: the exact legal entity that signed, not the brand on the signboard. A franchisee or a subsidiary is a different credit from the parent.
2. Term and remaining term: when it started, when it ends, and any renewal options and on whose choice.
3. Lock-in: how long the tenant is bound, and what it owes if it leaves during the lock-in.
4. Escalation: the percentage and interval, and when the next one falls due.
5. Security deposit: the amount, and confirmation it will be transferred to you or adjusted in the price.
6. Costs: who pays CAM, property tax, insurance and repairs.
7. Exit and restoration: notice periods and the condition the tenant must return the unit in.
8. Registration: whether the lease is registered. A lease that needed registration and was not is weak evidence if the tenant disputes it.
Step 2: judge the tenant
Ask for twelve months of rent credits in the seller's bank statement, not a rent roll the seller typed. Late or part payments are an early warning.
For a company tenant, read its public filings where available; for a smaller business, look at how long it has traded at this address and whether it has other outlets.
Find out why the seller is selling. A sale shortly before a lock-in ends, or just after the tenant asked for a rent cut, tells you something.
Check whether the tenant has a right to end the lease early (for example, if footfall or a licence fails) that would let it leave inside what looks like the lock-in.
Step 3: the yield arithmetic
Gross yield is annual rent divided by the price. Net yield takes off the costs the owner bears and an allowance for vacancy, and is better worked out on the total cost of buying (price plus stamp duty, registration and other charges) rather than the price alone.
Illustrative example (all numbers assumed, not market data): a shop priced at ₹1,20,00,000 let at ₹60,000 a month earns ₹7,20,000 a year, a gross yield of 6.0% on the price.
Now assume the owner pays property tax and insurance of ₹36,000 a year, and that the shop stands empty for two months in every three years. Lost rent averages ₹40,000 a year (₹60,000 × 2 ÷ 3), and if CAM of ₹8,000 a month falls on the owner while it is empty, that adds about ₹5,333 a year (₹8,000 × 2 ÷ 3).
Net rent is ₹7,20,000 − ₹36,000 − ₹40,000 − ₹5,333 = ₹6,38,667 a year, a net yield of about 5.3% on the price. If stamp duty, registration and other costs add ₹8,40,000, the total cost is ₹1,28,40,000 and the net yield on it falls to about 5.0%. This is before income tax on the rent.
Run your own figures in the rental yield calculator. Change one assumption at a time — vacancy, CAM, the next escalation — and see how far the yield moves.
Step 4: vacancy and re-leasing risk
Assume the tenant leaves when its lock-in ends. How long would the unit take to re-let, at what rent, and what would a new tenant ask for — a rent-free fit-out period, a lower rent, works by you?
Check the unit's frontage, floor, size and the approvals for the uses a replacement tenant might want. A unit approved only for office use cannot easily be re-let as a restaurant.
If the current rent is above what similar units are asking today, the next tenant may pay less. Compare the lease rent with live asking rents for similar units before you rely on it; our listings show asking rents, not agreed ones.
Step 5: CAM and other pass-through costs
Many leases pass CAM and sometimes property tax to the tenant. Confirm this in the lease, and confirm what happens to them while the unit is empty: they fall on you.
Ask the maintenance agency for the last year's CAM statement and any pending revision or special levy (for a lift replacement, a façade or fire-system upgrade). A large levy shortly after you buy comes out of your yield.
Worked example: the same unit without its tenant
Illustrative numbers only. Take the same ₹1,20,00,000 shop. Suppose the tenant leaves when its lock-in ends, the unit takes six months to re-let, and the new tenant asks for three months rent-free to fit out and agrees a rent of ₹50,000 a month instead of ₹60,000.
During the nine months without rent, the owner loses ₹5,40,000 of rent at the old level and pays CAM of ₹8,000 a month for the six empty months, ₹48,000. The new rent of ₹50,000 a month is ₹6,00,000 a year, a gross yield of 5.0% on the price.
If the price you pay is only justified by the current tenant's rent, check how the numbers look under this kind of scenario before you commit. The assumptions are yours to change; the point is to test them.
Tax on the rent you will receive
Rent from commercial property may carry GST at 18% (charged by you if you are registered, or paid by a registered tenant under reverse charge if you are not), and a tenant that is required to deduct will take 10% TDS on rent above ₹50,000 for a month under section 393(1) of the Income-tax Act, 2025. The rent is also part of your income for income tax.
Find out from the seller how GST and TDS are handled today, and ask your chartered accountant how they will apply once the lease passes to you.
Step 6: the purchase itself
All the checks for any commercial purchase still apply: title, land use, approved plan, completion and occupancy certificates, fire approval and dues. A tenant in occupation does not cure a defect in the approvals.
GST applies only if the unit is under construction and sold before the completion certificate. The buyer deducts 1% TDS on the price when it is ₹50 lakh or more (section 194-IA of the Income-tax Act, 1961 for transactions before 1 April 2026; the Income-tax Act, 2025 applies from then with renumbered sections).
Once you own it, the rent you receive may itself carry GST and be subject to TDS by the tenant; see the guide to GST and TDS on commercial rent.
Documents to collect, questions to ask, mistakes to avoid
Documents: the full lease and any amendments; registration receipt for the lease; twelve months of rent credits; deposit receipt; tenant's PAN and GSTIN; CAM statements; property tax receipts; all title and approval documents for the unit.
Questions to ask the seller: Why are you selling? Has the tenant asked for a rent reduction or served any notice? When does the lock-in end? Has rent ever been late? Is the deposit being transferred to me? Are there any disputes with the maintenance agency?
Mistakes: valuing the unit on gross yield; ignoring the lock-in end date; trusting a typed rent roll; forgetting that the deposit is a liability you take over; assuming the next tenant will pay the same rent.
This is general information, not tax or legal advice; confirm how it applies to you with a chartered accountant (and a lawyer for the documents) before you sign or pay.
Common questions
What is a pre-leased property?
A commercial unit sold with a tenant already in occupation and paying rent under a lease, so the buyer takes over the lease as landlord.
How do I calculate rental yield on a pre-leased property?
Gross yield is annual rent divided by the price. For net yield, subtract the costs you bear and an allowance for vacancy, and divide by the total cost including stamp duty and registration. The rental yield calculator does the arithmetic.
Who keeps the tenant's security deposit when I buy?
You owe it back to the tenant at the end of the lease, so the sale should either transfer the deposit to you or reduce the price by it. Record which in the sale deed.
What matters more, the rent or the lock-in?
The lock-in and the remaining term usually matter more, because they decide how long the income is secure. A high rent with no lock-in can stop at short notice.
What happens to the lease when I buy a pre-leased unit?
The lease continues with you as the landlord. Tell the tenant in writing, get the deposit transferred or adjusted in the price, and agree how rent for the month of sale is split.
Is GST charged when I buy a pre-leased unit?
Not on a completed unit sold after its completion certificate, or a resale. GST applies to an under-construction unit sold before the completion certificate.
Sources
- TDS on purchase: section 194-IA of the Income-tax Act, 1961 (transactions before 1 April 2026); Income-tax Act, 2025 from 1 April 2026 with renumbered sections; checked 2 October 2026
- GST on under-construction property: Notification 03/2019-Central Tax (Rate); checked 2 October 2026
- Worked yield example uses assumed round numbers, not market rents, prices or yields
Last checked 2026-10-02.