No. BDG-20/3/2021 -Building-DOP Government of India Ministry of Communications Department of Posts (Estates Division)
Dated 18th February, 2022
Subject: Long term leasing and licensing policy for hiring accommodation for office purpose in Department of Posts-reg.
In supersession of existing orders/instructions on the subject, the competent authority has now decided to frame a comprehensive guideline for leasing office accommodation for use of the Departmental and licensing of the surplus space available with the Department. These guidelines are given as under in two parts. Part A is for leasing office accommodation for use of the Department and Part B is for licensing of the surplus space available with the Departmental:
Part A
1. Revision of rent shall be allowed only once in five years except in the case of accommodation lo be hired for setting up of Parcel Hubs in which case revision can be made once in three years. Such revision shall, however, be undertaken by the department only on receipt of a written request for the same from the landlord concerned. revision of rent, if requested by the landlord should be processed well in lime by the Circle, i.e. within 6 months from the date of the request made by the landlord. The quantum of increase of rent in all cases shall not exceed 8% p.a. with the exception of cities and towns where Rent Control Act is applicable where it would be lesser of the increase permitted under the Bent Control Act or increase up to 8% per annum. If the enhancement proposed is beyond this limit, the Head of the Circles may examine the exigencies involved and decide the case as per his financial powers. Rest of the cases, beyond his financial powers, should be referred to Directorate with the concurrence of CIFA and approval of HOC for approval of Secretary (Posts).
2. The date of receipt o{ a request from the landlord for the revision of rent or the date from which such revision is due i.e. after three/five years, whichever is later, will be the date from which the revision is to be allowed.
. Revision of rent should be allowed only if necessary repairs, special repairs and maintenance of the rented premises have been carried out by the landlord to the satisfaction of the Departmental and the landlord agrees and executes a fresh lease agreement after revision of rent
4. There would be no distinction for the revision of rent between the premises located at stations where the Rent Control Act is applicable and where it is not applicable in so far as periodicity is concerned i.e it will be uniformly three/five years.
5. The re-assessment of a reasonable rent when it will become due , will be got done by the landlord himself from the respective Rent Controller in respect of premises taken on rent through the Rent Controller. ln respect of all other buildings revision of rent will be examined by the departmental Fair Bent Assessment Committee (FRAC).
6. While intimating the rent payable, the Fair Rent Assessment Committee will intimate the revised rent in two parts. The first part would contain the recommendation for the "core" rent payable to the landlord which would consist of the component of Municipal charges /Taxes, surcharges etc. which is lo be passed on by the landlord to the Municipal Corporation /local authorities. ln case, after completion of assessment /re-assessment of such rent as referred 1o above, Municipal Charges taxes , surcharge etc. go up o. any new tax is levied before the date of the next revision after three years, payment of the same will also be allowed on production of documentary evidence by the landlord regarding The discharge of higher liability towards taxes etc. It is further added that the department will pay taxes only if these are required by the laws applicable in a state or within the .jurisdictions of local authority. ln any case only a part of it will be borne by the department. Before doing so, it would, Therefore, be necessary to find out from the concerned State Government/local authority the orders in force within its particular jurisdiction.
7. ln the past, after expiry of the original period of lease, the department used to take resort to the optional clause lo continue in the same premises without enhancement of rent. Clause 19 of the new lease form seeks to correct this imbalance by providing for a mutually agreed upon rate of enhancement to protect the landlord's interest. Al the same lime, if an agreement cannot be reached, the department retains the right to continue in the premises on a year to year basis to prevent any disruption 1o public services and this period should not exceed two years.
8. The lease agreement can be made for a period of three/five/ten/fifteen/twenty/twenty-five years on the new lease form enclosed based on necessity for the same 1o be recorded in writing. Revision of rent after expiry of the lease agreement will be as per para 1 above. 9. The question of rationalizing the principles for certifying the reasonableness of rent in in respect of rented building under the occupation of the department has been examined and if has been decided that revised/enhanced rent of such building will be treated as a fresh case of rent assessment and will be done according to the following principles:
a. Work out the reproduction cost of the building as on the date of reassessment on the cost index for the concerned locality.
b. Work out the depreciated value of the building assuming a s:raight line variation of depreciation depending on the age of the building.
c. Work out the land area appurtenant to the building taking into account the local bye-laws. ln case no such bye-laws exist in the locality, general practices prevailing in the locality should be followed. Any surplus land that does not enhance the utility of the building should be excluded. Extra rent for utilization of surplus land for cycle/car parking/generator shed etc. may be limited 10 10th of the rate of rent per sq ft./ sq. m. .rent of the main accommodation.
d. The cost of the appurtenant ,and should be ascertained from the local Revenue Authority. For this purpose, the cost of land should be divided between the number of tenants in the building, apportioned between the tenants according to the plinth area each one is having, if the Department is not the sole tenant.
e. Where the landlord has made additions/ alterations in the building as per departmental requirements, the same will be taken into consideration in working out the capital cost of the building.
f. The cost o, the appurtenant land may be added to the depreciated value of the building to assess the reasonable return on the properly. ln the case of Metropolitan cities, this percentage rate of return must be taken as 10% per annum. ln the case of other cities/towns, this figure may be taken as 9'/" per annum.
g. The figure arrived at thus would constitute the annual rent of the building on the basis of the principle of valuation. This is the "Core rent as mentioned in Directorate letter dated 25.02.1992.
h. After working out the rent on the above principles of valuation, the current rate of market rent in the locality will be ascertained by FRAC. For this purpose, rent paid by Government and semi Government organizations, public sector undertakings and nationalized banks will be taken into account. If there are no land//building/go down/premise hired/occupied by these organizations in the vicinity/near highway/airports/multi modal transportation hubs etc., rent being paid by private organizations engaged in Courier Express, Parcel or Logistics sector etc. may also be taken into account by recording the reasons in writing, in case of accommodation required for purpose of setting up of Parcel Hubs and Transshipment Centres.
The data collected must be authentic and the building should be comparable in specifications an amenities provided.
i. After getting the two values, i.e. rent based on the recognized principles of valuation and the current market rate, the endeavor of the competent authority should be to balance the two factors of rent worked out on the basis of the principles of valuation as well as market rent. While weightage should be given to the market rent so as to sufficiently compensate the landlord, all efforts should be made to lix the rent lower than the market rent. For this purpose, after considering the FRAC's report, the competent authority should
negotiate with the landlord. Where the enhanced rent falls within the powers of the Divisional Superintendent, the negotiation will be carried out by the next higher authority.
j. If the Department has incurred any expenditure on maintenance/repairs of a particular building, it shall be recovered from the rent payable. k. Enhancement of rent should be effected only after a fresh lease deed is signed by the landlord. l. For the purpose of these orders, the constitution of FRAC at various level will continue to be guided by the orders already in force. However, for all cases where enhancement of rent would fall within the powers of the Divisional Superintendent, the revision of rent will be considered by a duly constitute FRAC even where the initial rent has been within the delegated powers of the Divisional Head without the assistance of the FRAC.
10. if the other party in the rent agreement decided to register the lease/license deed in their own format, it may be allowed provided that it should not be contrary to the interest of the department in any manner. ln all other cases, the lease/license deed will be excluded on the formal enclosed herewith. 11. Department is liable to pay the GST, as admissible, on rent, wherever applicable. 12. Composition of Fair Rent Assessment Committees at the three Levels namely 1st Level,2nd Level and 3rd Level in respect of Cities/towns which have been reclassified as 'X', 'Y' and 'Z' categories vide Ministry of Finance O.M. No. 2913y2008-E-ll dated 29th August, 2008 and the competent authority to approve/accept the recommendations of the FRAC is as follows:
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