Why 11 months
Most rent agreements are signed for 11 months so that they can avoid stamp duty and other charges. According to the Registration Act, 1908, the registration of a lease agreement is mandatory if the leasing period is more than 12 months. If an agreement is registered, stamp duty and registration fee needs to be paid for it. For instance, in Delhi, for a lease of up to five years, the stamp paper cost is 2% of the total average annual rent of a year. Add a flat fee of Rs100, if a security deposit is part of the agreement. For a lease of more than 5 years but less than 10 years, it is 3% of the value of the average annual rent of a year. For 10 years and more but less than 20 years, it is 6% of the value of average annual rent of a year. The stamp paper can be in the name of the tenant or the landlord. In addition, a flat registration charge of Rs1,100 is also to be paid by demand draft (DD).
If a property is let out for 24 months at a monthly rent of Rs20,000 for the first 12 months and Rs22,000 a month for the subsequent 12 months. The charges for registering this agreement would be: 2% of the average rent for 12 months: Rs5,040, (average monthly rent is Rs21,000, average annual rent is 21000*12 and 2% of that is Rs5,040).
Plus if the agreement includes a security deposit, add another Rs100 and Rs1,100 as registration cost—bringing the total cost to Rs6,240. This is not counting the professional fees due to lawyers or other intermediaries for all the paperwork.