In Mumbai commercial real estate leasing deals often, a landlord will make sure that the future tenant has a paid-up capital of one crore (ten million) rupees before renting his or her commercial space. The reason behind this is because the landlord wants to make sure that the business is financially sound, can stomach losses and be able to pay the office space rent or the shop rent on time. There are some landlords that will simply take a larger deposit as well if the company does not have a paid-up capital of one crore whereas others don’t even check. The truth is, requiring a paid-up capital of one crore eliminates a number of potential tenants for the respective commercial space for rent which generally makes it more difficult to lease out the space. On the flip side, and as mentioned, the risk of a company not being able to pay their monthly office space for rent or shop for rent amount is likely reduced if the firm has a paid-up capital of one crore. It’s pretty straight forward; however, this is a strange bit… since we’ve been in the market for nearly five years, we haven’t been able to figure out why…. The one crore amount hasn’t changed at all, although inflation has increased on average of 5-6% a year over the last 5 years, not to mention that the Rupee has gotten pummelled. The one crore amount doesn’t seem to change whether the commercial property is small or large, where we’ve seen the one crore of paid up capital required for properties as small as 100 square feet to well over 10,000 square feet. From speaking with some seasoned developers, we were told that one crore is a healthy number and that someone renting 100 sq ft for instance, probably doesn’t have money so he/she needs to have a higher paid up capital per sq ft as opposed to a 10,000 sq ft office space for rent, where the tenant doesn’t have to prove his ability to pay given the fact that the commercial space for rent itself costs so much money and the deposit given for an office space for rent in Mumbai, let alone a shop for rent, of that magnitude could be over 50 lakh. We aren’t saying it’s the best system, but after further examination, it’s not that strange. The good news for owners of commercial properties for rent is that there is no rule whatsoever to have even a single rupee of paid up capital. And with that, let’s be happy that there is no rule governing this and leave the Mumbai commercial real estate market place as much up to the free markets as possible!