Landlords and tenants are bound by the legal contract known as the rent agreement, which specifies the terms and conditions of the tenancy. It also mentions the rent that the tenant must pay. The rent is usually finalised after proper negotiation between the parties. Many tenants may have come across the term ‘premium rent’, which refers to the additional amount they are required to pay based on unique amenities, property size, location advantages, and rental market conditions. Typically, landlord and tenant agree to lease terms, considering market fluctuation and appreciation.
See also: A complete guide to security deposit in rent agreement
What is premium rent?
Premium rent is the rent above the rate at which a property could be expected to attract. It is justified by both landlord and tenant, given the present and future benefits. Usually, tenants agree to pay premium rent due to the added value of rental space and lease terms that may benefit them financially.
For example, an apartment in a prime neighbourhood of Delhi has a monthly rent of Rs 25,000, similar to other market properties. The landlord, who is aware of growing market trends, offers a lease at Rs 30,000 per month but fixes this rate for five years. In this situation, the initial rent is higher. However, the tenant will agree to the specified amount, given that future rent based on market trends may exceed the extra Rs 5,000.
This arrangement is beneficial for the tenant as he will save money in case the market rate rises. Therefore, premium rent is seen as a strategic approach to balancing higher rent payments against long-term financial stability.
Factors that impact premium rent of property
Rents of properties are determined based on several factors, such as property location, market conditions, amenities, connectivity, etc. There may be scenarios when the rent could exceed the market rate, which is considered in the premium rent category.
This increase could be attributed to various factors, as discussed below:
Upgraded amenities
The availability of unique amenities that could make the property more desirable than others can be one key factor for the high rent. For example, the presence of a fitness centre in a commercial space.
Property features
High-quality features, such as modern facilities, security systems, or ample parking can result in higher rents.
Prime locations
Properties in the city centre or popular shopping destinations may command premium rent as they tend to draw more customers or offer convenience to tenants.
Tenant benefits
In some cases, tenants may receive additional benefits, such as flexibility in customisation or exclusive rights to the property, justifying the premium rent.
Business potential
Commercial properties command higher rents due to their location or if the space draws high foot traffic or visibility. Businesses may pay an extra amount for a space that guarantees higher sales or customer engagement.
Lease terms
Tenants may be willing to pay premium rent for stability and predictability it offers. For instance, a longer fixed rent period without an increase can justify the high rent.
Market conditions
Typically, landlords increase rents when there is a high demand or inflation. Tenants may have to pay above-market rates if they want to secure a property they prefer, especially if rent increase is expected in future.
How premium rent is calculated?
The premium rent for a property in a particular location is calculated based on various factors such as:
- The property’s condition and size
- Parking space availability
- Services
- Prices of similar properties
If the property surpasses other rentals in multiple aspects, landlords charge a premium rent. The landlord offers the final price, to which the tenant agrees, and the lease is signed.
Difference between rent and premium
| Rent | Premium |
| It is the regular monthly payment made by a tenant to a landlord for using the property. | It is the additional amount paid by the tenant over and above the standard market rate. |
| Rent is paid to cover the use of property under agreed terms. | Premium rent is paid to ensure or cover the risk of potential damages. |
| Rent is calculated based on the property’s value in the open market. | Premium is calculated based on factors, such as property’s features and unique amenities and business potential. |
| It reflects the price of similar properties in the area. | It reflects a higher price than those of similar properties in the area. |
| The rent amount may change over time due to market conditions, inflation or lease terms. | The landlord and tenant may agree to a higher rent, fixed for some years. |
Housing.com News Viewpoint
If you are a prospective tenant looking to secure a residential or a commercial property in an area, it is important to understand the concept of premium rent and its advantages. Typically, premium rent comes with the benefits of access to unique amenities, features, and better living conditions. However, both landlord and tenant must study the market trends to avoid complications.
FAQs
What is the meaning of premium rent?
Premium rent refers to the additional amount charged for rental properties for upgraded features or amenities.
What is a premium lease?
A premium lease involves a higher rent payment for a property with upgraded or luxury features.
What is the difference between lease and rent?
A lease is a legal agreement specifying terms and conditions for occupying a property. On the other hand, rent is the amount a tenant must pay to a landlord for using the property under the specified lease terms.
| Got any questions or point of view on our article? We would love to hear from you. Write to our Editor-in-Chief Jhumur Ghosh at jhumur.ghosh1@housing.com |
