Industrial Premises Lease Agreement (Pakistan)

An Industrial Premises Lease Agreement in Pakistan creates a tenancy over the premises and records the agreed rent, deposit handling, permitted use and the grounds on which it may end.

The Transfer of Property Act 1882, Section 105, defines a lease of immovable property as a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service, or any other thing of value. Section 107 of the Transfer of Property Act 1882 requires that leases of immovable property for a term exceeding one year be made only by a registered instrument — meaning industrial leases of more than twelve months must be registered with the relevant Sub-Registrar under the Registration Act 1908.

Industrial premises in Pakistan are typically located in designated industrial zones administered by provincial development authorities — the Punjab Industrial Estates Development and Management Company (PIEDMC) for Punjab industrial estates such as Faisalabad Industrial Estate, Sundar Industrial Estate, and M-3 Industrial City; the Sindh Industrial Trading Estate (SITE) in Karachi; and SITE Limited in Karachi managing several industrial areas. The Special Economic Zones (SEZs) established under the Special Economic Zones Act 2012 (as amended by the Special Economic Zones (Amendment) Act 2021) provide additional industrial leasing frameworks under the Board of Investment (BOI).

Provincial rent control legislation — including the Rent Restriction Ordinance applicable in various provinces — primarily governs residential and commercial premises rather than industrial properties, but provincial governments may apply specific regulations to industrial tenancies. In Punjab, the Punjab Rented Premises Act 2009 defines premises broadly but industrial leasing of dedicated factory or warehouse buildings in industrial estates is typically regulated directly by the relevant estate authority.

Withholding tax on industrial lease rental income is governed by Section 155 of the Income Tax Ordinance 2001 — a prescribed person (company or business) paying rent for immovable property must withhold income tax at the applicable rate (currently 15% for companies, though rates are subject to periodic amendment by the Federal Budget). The withheld tax is deposited with the Federal Board of Revenue (FBR) within seven days of the end of the relevant month. Landlords are entitled to credit the withheld tax against their annual income tax liability.

Stamp duty on industrial lease agreements is payable under the Stamp Act 1899 as administered by the relevant provincial Board of Revenue. The rate of stamp duty for lease agreements varies by province and by the total value of rent payable — Punjab, Sindh, KPK, and Balochistan each have their own stamp duty schedules. Leases must be executed on properly stamped paper or adjudicated for stamp duty before registration with the Sub-Registrar under the Registration Act 1908.

An Industrial Premises Lease Agreement in Pakistan is needed whenever a business, manufacturer, logistics company, or investor leases industrial property — whether from a private landlord, a provincial industrial estate authority, or the Board of Investment under an SEZ framework — and the parties wish to document the terms clearly and create an enforceable legal relationship.

An Industrial Premises Lease Agreement is needed when a manufacturing company — textile, pharmaceutical, food processing, chemical, steel, or auto parts — leases a factory building or industrial plot in Punjab, Sindh, KPK, or Balochistan from a private industrial landlord. Without a written agreement registered under the Registration Act 1908, the tenant has limited legal protection against eviction, rent increases, or disputes about the condition of the premises.

An Industrial Premises Lease Agreement is required when a logistics and warehousing company leases a warehouse, cold storage facility, or distribution centre near a major transport hub — such as Karachi Port Trust, Port Qasim, Lahore Dry Port, or Sialkot Dry Port operated by Sialkot Dry Port Trust. The lease must clearly define permitted storage uses, hazardous materials restrictions, and loading infrastructure obligations.

An Industrial Premises Lease Agreement is needed when a foreign investor or multinational company setting up manufacturing operations in Pakistan — under the Foreign Private Investment (Promotion and Protection) Act 1976 or in a Special Economic Zone under the Special Economic Zones Act 2012 — leases industrial premises for its Pakistani production facility. The agreement must address currency of rent payment (PKR or foreign currency subject to SBP approval), repatriation rights, and compliance with applicable industrial zoning regulations.

An Industrial Premises Lease Agreement is required when a small or medium enterprise registered with SMEDA (Small and Medium Enterprises Development Authority) leases a workshop, light industrial unit, or artisan workspace in a provincial industrial estate. Formal documentation protects both the SME tenant and the estate authority against disputes about improvements, utilities, and exit obligations.

An Industrial Premises Lease Agreement is needed when a company subleases a portion of its leased industrial facility to a sub-tenant — common in large industrial estates where main tenants partition surplus space for affiliated businesses. The sublease must be permitted by the head lease and comply with the Transfer of Property Act 1882, Section 108(j), which restricts subletting without the lessor's consent unless the lease expressly permits it.

A valid and enforceable Industrial Premises Lease Agreement in Pakistan under the Transfer of Property Act 1882 and applicable provincial regulations must contain the following essential elements.

Party Identification: Full legal names and addresses of the landlord (lessor) and tenant (lessee). For companies, the SECP registration number and NTN under the Income Tax Ordinance 2001 must be included. For individuals, the NADRA CNIC number of each party is required. The authority of any signatory acting on behalf of a company (by board resolution or power of attorney) must be confirmed.

Premises Description: Precise identification of the industrial property — plot number, survey number, khasra number (in rural areas), street address, industrial estate name (e.g. Sundar Industrial Estate, SITE Karachi), area in square feet or kanals/marlas (local measurement), and nature of structure (factory building, warehouse shed, open industrial plot). Attaching a site plan or layout as a schedule is strongly recommended.

Lease Term: Commencement date and expiry date, with an option to renew if agreed. Under Section 107 of the Transfer of Property Act 1882, a lease exceeding one year must be executed by a registered instrument — registration with the Sub-Registrar under the Registration Act 1908 is mandatory.

Rent and Escalation: Monthly or annual rent in Pakistani Rupees (PKR), due date, and accepted mode of payment (bank transfer, cheque drawn on a scheduled bank). An annual rent escalation clause — typically 10% to 15% per annum for industrial premises in Pakistan — should specify the escalation percentage and the date from which escalation applies.

Security Deposit: The amount of security deposit — typically two to six months' rent — and the conditions for its refund or forfeiture at the end of the lease. The security deposit is held by the landlord and does not bear interest unless specifically agreed.

Permitted Use and Zoning Compliance: A description of the permitted industrial use — manufacturing, warehousing, processing, assembly — and a prohibition on use for residential, retail, or any purpose inconsistent with the applicable zoning regulations under provincial town planning laws and the relevant industrial estate authority's regulations.

Withholding Tax Obligation: An express clause stating that the tenant (if a prescribed person under Section 155 of the Income Tax Ordinance 2001) shall withhold income tax from rent payments at the applicable rate and deposit it with FBR, providing the landlord with a tax deduction certificate. The landlord's NTN must be stated to support FBR compliance.

Maintenance and Repairs: Allocation of responsibility for structural maintenance (typically the landlord) and day-to-day maintenance, janitorial services, minor repairs, and utilities (typically the tenant). Industrial leases should specifically address industrial services — electricity connection capacity (KVA), water supply, effluent treatment obligations under the Pakistan Environmental Protection Act 1997 and provincial Environmental Protection Acts, and gas connection.

Termination and Forfeiture: Grounds for early termination — non-payment of rent (typically fifteen to thirty days' notice under Section 111 of the Transfer of Property Act 1882), breach of permitted use, insolvency, and abandonment. Forfeiture provisions and the notice period required before re-entry must comply with Transfer of Property Act 1882.

Forms-legal.com provides this Industrial Premises Lease Agreement (Pakistan) template as a practical starting point for industrial landlords and tenants. Leases exceeding one year must be registered with the Sub-Registrar under the Registration Act 1908, and parties should obtain legal advice from an Advocate enrolled at the relevant provincial Bar Council — particularly for leases in Special Economic Zones regulated under the Special Economic Zones Act 2012.