Rent increase calculator
Enter the current rent, the escalation percentage and the number of years. The calculator shows the rent at each renewal and the cumulative increase.
Escalation compounds on the previous year's rent unless the agreement specifies otherwise. An agreement that says rent will be revised by mutual agreement has not set an escalation at all — state the percentage.
Escalated rent is calculated as current rent × (1 + escalation percentage), applied to the previous year’s rent at each renewal. Over several years the increase compounds, so a 5% annual escalation raises rent by about 15.8% over three years rather than 15%.
How the calculation works
The arithmetic is simple; the thing that trips people up is that escalation compounds.
The formula: New rent = Current rent × (1 + increase)
A rent of ₹18,000 escalating at 5% becomes ₹18,900 after one year, ₹19,845 after two and ₹20,837 after three. The cumulative increase is ₹2,837, or 15.76% — not 15%, because each year’s increase applies to the escalated figure rather than the original.
Over a longer term the difference grows. Ten years at 5% gives an increase of about 62.9% rather than 50%. Any agreement using a percentage escalation is compounding unless it expressly states that the increase is calculated on the original rent.
Inputs you will need
The current rent, the escalation percentage from the agreement, and the number of escalations. Note that the number of escalations is not always the number of years — an agreement with a two-year lock-in and annual escalation thereafter escalates fewer times than its term suggests.
Check what the escalation applies to. Where maintenance or other charges are payable separately, an escalation on rent does not necessarily escalate those, and agreements are frequently unclear about it.
- Current rent. The base for the next escalation.
- The percentage from the agreement. Not a market assumption.
- Number of escalations. Which may be fewer than the number of years.
Worked example: ₹18,000 rent with 5 per cent annual escalation over 3 years
At 5% the rent reaches ₹20,837 by year three. The cumulative row shows how far compounding diverges from simple multiplication.
| Year | At 5% | At 7% | At 10% |
|---|---|---|---|
| Start | ₹18,000 | ₹18,000 | ₹18,000 |
| Year 1 | ₹18,900 | ₹19,260 | ₹19,800 |
| Year 2 | ₹19,845 | ₹20,608 | ₹21,780 |
| Year 3 | ₹20,837 | ₹22,051 | ₹23,958 |
| Year 5 | ₹22,973 | ₹25,246 | ₹28,989 |
| Cumulative to year 3 | +15.8% | +22.5% | +33.1% |
Typical escalation norms and state rent laws
Annual escalations of 5% are the most common convention in Indian residential leave-and-licence agreements, with 7% to 10% appearing in commercial leases and in residential markets with tight supply. There is no statutory default — the figure is whatever the parties agree, and an agreement silent on escalation has not provided for one.
Where older rent control legislation still applies to a tenancy, it may restrict increases in ways that override the agreement, and a handful of states have adopted the Model Tenancy Act framework, which sets out its own process for revision including notice requirements. Both are exceptions rather than the general position, but both are worth checking for older tenancies and older buildings.
The clause to insist on either way is a specific one. An agreement stating that rent shall be revised by mutual agreement at renewal has set no escalation at all, and the negotiation then happens with the tenant already in occupation — which suits whichever party is more willing to lose the tenancy, and that is rarely both.
- 5% annually is the common residential convention. Commercial is often higher.
- There is no statutory default. Silence means no escalation.
- Rent control and the MTA are exceptions. Check for older tenancies and adopted states.
- "By mutual agreement" is not a clause. State the percentage.