By Accommodation Times Bureau
The Indian rental housing sector is seriously under-serviced by the organized real estate Industry. The onus to meet the huge demand for such housing falls largely on the unorganized sector – meaning individual property owners. By the same coin, the rate of organization of the sector is so rapid that we can see the shortage of rental space increasing alarmingly on a year-on year basis.
Also, one should remember that the shortage of rental space in India extends far beyond the usually considered boundaries. It is typical to focus only on the mega cities, which have a lot of economic activity and, therefore, a large quantum of inbound workforce to drive rental demand.
If we factor in the 30+ cities in India with populations of more than a million that also generate a considerable demand for rental accommodation, the problem becomes huge.
Another aspect of the rental property conundrum in India is that there is no thought given to the different kinds of products required to meet the different types of rental demand. For instance, there is a huge imbalance between bachelor and family residences in the rental market in most cities. So far, there has been no real concept of public or private agencies constructing residential projects specifically aimed at meeting the demand for rental housing. It is only now that agencies such as MHADA and MMRDA have woken up to this lacuna and have initiated certain projects targeted to meet this demand.
The first thing to do while planning to rent out your home is to find out all the details about the prevailing rental rates in your vicinity. You could consider approaching 2-3 brokers to find an accurate estimate. Next comes choosing a tenant. You may choose a tenant through a broker, advertisement or even word of mouth. Before finalizing a tenant, look into the prospects’ records, such as salary slips and bank statements to ensure their capacity to meet the rent obligations in a timely manner. o avoid future litigation related to the property, including vacating it when stated, all terms and conditions of the property let-out must be explicitly stated and authorized by both parties in a rent agreement or deed. Additionally, the agreement must be signed by two witnesses.
Though registering a rent deed is not mandatory, it is advisable to do so, particularly if the rent amount is substantial. Important components of a rent deed are:
1. The purpose of the let-out, whether residential or commercial
2. Duration of tenancy, which is typically between 11 months and 5 years
3. Clause for terminating the tenancy, including duration of the notice period
4. Monetary details, including terms of deposit, monthly rent and periodical increase in rent
5. Penalty for violating any clause of the agreement
6. If a rent agreement is made with a corporate entity, it should mention the details of the person authorized to execute the agreement on the company’s behalf.
Till a few years ago, one of the most dreaded things to do for many house owners was renting out their property. Most house owners preferred to lock up their property rather than renting them out to unknown people. This is because of their own bad experience, or what they heard or read about the bitter experiences of others, and the rent control laws favoring tenants. Now things are getting better thanks to the changing rent control laws.
Renting out your unoccupied property is a wise option. By renting out your property, you can generate a significant amount of income, which can help you in a number of ways, besides taking care of house maintenance expenditure. The first thing to do while planning to rent out your home is to find out all the details about the prevailing rental rates in your vicinity. You could consider approaching 2-3 brokers to find an accurate estimate. Next comes choosing a tenant. You may choose a tenant through a broker, advertisement or even word of mouth.
Despite the changes in the rent control laws, you have to be careful, before renting out your property. Here are some tips that can come in handy, when you rent out your property.
Check out the background of the tenant. Find out where he/she is working & what his / her business is and whether earning enough to pay the rental charges regularly. In case of companies, check their track record and reputation, what business they do, whether your society byelaws allow renting out for commercial purpose. If you happen to choose the wrong tenant, it will cost you a big fortune.
If renting your place to a foreigner, you need to register with the Police Commissioner. In some areas, even for renting out to Indian citizens, you need police permission. Check it out.
Generally, it is better to rent out properties for a short duration. The eleven-month agreement is chosen by people, as it pre-empts the rent control laws, which apply after 12 months. However, companies prefer a longer period of lease.
Always go for a legal agreement and register it. Prepare a comprehensive agreement without any loophole. The agreement must be carefully drafted by a property lawyer.
There are three types of agreements for renting out: a) Rental b), Lease, c) Leave and License. ‘Leave and License’ agreement is the best option. Under this type of agreement, property owner’s interest is better protected than others.
Take advance rent and security deposit, it will be useful, in case the tenant fails to pay the dues on time.