The Nuances of Leasing Commercial Spaces for Banks and Financial Institutions

Are you thinking of leasing your property to a bank?

As per the Banking Regulation Act of 1949, the Reserve Bank of India (RBI) provides incentives for banks looking to open branches in underbanked areas of the country. Based on this, banks search for properties that assist their expansion plans and help fulfil these requirements. An individual who is in possession of a property they wish to lease, may do so to a bank that needs a premises in the same locality.

Leasing property to banks is governed by a few common guidelines. For instance, a bank wanting to rent a space must first issue a public notice, usually a newspaper advertisement, inviting tenders for it. Any interested party then requires to respond to this notice as per the procedure described. The bid is made in two parts: The ‘Technical Bid’, consisting of all the property information, from a detailed site plan and dimensioned floor plan to the legal documents regarding the ownership. This bid must also contain the Terms & Conditions acceptable to the owner and the notice inviting tender.

The ‘Price Bid’ is reserved for all financial related matters like monthly rent, taxes, etc. Properties can also be promoted on online property portals, through the classifieds in newspapers, magazines or real estate supplements. This will help to get the word out, especially if your space satisfies the requirements of an institution.

The challenges

The technicalities of leasing a property to a financial institution requires some in-depth knowledge of, not only real-estate aspects, but also the nature of business that the institution is involved in and how that may impact the rent and interest values on it.

At the same time, banks and financial institutions have unique requirements that don’t always make it easy to procure the right office space. In most cases long term leases are sought, usually no less than 5 years.

A ground floor property with road access is always preferred and sufficient parking provisions need to be available. Banks also require the construction of ‘strong rooms’ as per standards set by the RBI.

A fitting response to these challenges for both the lessor and the lessee, would be to introduce a commercial real estate partner. An intermediate body that understands its client’s existing and future requirements, can assure quality in every deal and prove to be mutually beneficial. Some of the ways in which a real estate partner can help are:

1. Sourcing of properties as per requirements

2. Ensuring that the premises satisfies all legal requirements

3. Registering the agreement

4. Handling negotiations with property owners and supervising their scope of work before hand over

5. Evaluating rent and renewal policies

While renting a property may be commonplace, in some sectors it poses more aspects for consideration than others. For banks and financial institutions, concerns extend beyond finding a good location. By partnering with experienced real estate professionals who can identify and communicate with potential lessors, the opportunities to find the right office spaces are multiplied.

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