Valuing a property that has tenants in it

By Parish Rao · 27 August 2026 · 6 minute read

A building with a sitting tenant paying an old rent is not worth what the empty flat next door is worth. Sometimes it is worth dramatically less, and pretending otherwise produces reports that collapse the moment anyone tests them.

Why tenants change the number so much

Value comes from what a buyer would pay. A buyer of a tenanted property is not buying a home they can move into. They are buying an income stream, plus the hope of vacant possession one day.

If the rent is an old protected rent, that income can be almost nothing in today's terms. And if the tenancy carries strong statutory protection, the hope of vacant possession may be distant. The buyer prices both realities, and the discount can be very large.

The types you meet in India

• Old protected tenancies. Decades long occupation under rent control, often at rents fixed long ago. The hardest to value and the biggest discounts.
• Pagdi arrangements. Mostly Mumbai. The tenancy itself has transferable value, and there are established ways to assess it. Our Mumbai litigation page covers this.
• Ordinary leave and licence. A modern eleven month agreement at market rent. Usually a minor factor, because possession returns predictably.
• Commercial tenancies. Value depends heavily on the lease terms, remaining period and the covenant of the tenant.
• Family members in occupation. Not tenants in law, but they affect a sale in practice, and an honest report says so.

How it is actually valued

The property is generally assessed in parts rather than as one number. The vacant portions are valued conventionally. The tenanted portions are valued on what they actually yield and what the reversion is realistically worth.

Where portions of a building are in different situations, which is normal in old family properties, each is treated separately and then combined. A single blended figure for a building where the ground floor has a protected tenant and the upper floors are empty is not a valuation, it is an average of two different things.

Why courts look closely at this

Because it is the easiest place to distort a report. A party wanting a high number simply does not mention the tenant. A party wanting a low number describes a straightforward licensee as an immovable protected tenant.

Both get found out. The other side knows exactly who occupies the property, and a report that misdescribes it loses credibility on everything else too. This is one of the specific points we cover in what makes a valuation hold up in court.

What we need from you

• Who occupies which portion, and since when.
• What rent is actually being paid, and under what document.
• Whether any proceedings are pending against the occupant.
• Whether the tenancy has been transferred or inherited over the years.
• Access to see the property, including the tenanted portions where possible.

Tell us the awkward parts. A report that acknowledges a difficult tenancy and values it properly is worth far more than one that quietly ignores it.

Read about court valuations, or describe the occupancy to us and we will tell you how it affects the figure.