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Are You A Well-Informed Tenant?

Are You A Well-Informed Tenant?

Are You A Well-Informed Tenant?
Industry experts suggest it is wiser to buy a property when the monthly rent is more than the EMI on buying a property. (Dreamstime)

Most tenants wish to own a home of their home sometime in life and not pay a heavy rent every month. Thanks to all the information available to us, as tenants and buyers, we are aware of our rights and do view others with some amount of caution. But as tenants, how aware are you of the property market around you?

Here's an example. On a very popular community forum, a certain real estate investor, Benjamin D, writes the following, “I showed a very nice, totally re-done to some young couple in the very beginning of my real estate investor journey. They see the home, seem happy and tell me they want the home. I told them rent was Rs 20,000 per month, and we sign the leasing contract on site. One year later, I notify them with a rent raise, to Rs 22,000 per month. They call me up and they say they are moving out because their budget was Rs 20,000 only. They told me they would stay for the same rent but leave otherwise. I decided to stick to the rent raise as there was a big tax increase in that year. They walked away.

A few months later I see them in the building, as I had been there to watch over some problem. Surprised, I asked if they rented a condo in the same building. They smiled and said “No sir, we bought one!”. After a five-minute talk I figured they had paid about Rs 5 lakh over the market value. I actually told them “for that price, I would sell you my property (which is two storeys above theirs) and give you Rs 3 lakh back! Tenants are absolutely uneducated about the market. They take decisions purely guided by emotions.”

Truly so. While there are many indicators and instruments that can help a home buyer know the right price of the property, with so many players in the market with plenty of options at different price points, both buyers and tenants are often confused. What should you do? Here are some pointers:

What are you paying for?

A property that is close to the central business district, or to your children's school, or is in a locality that boast a conducive infrastructure, malls, hospitals and hangouts, will always be priced higher that their counterpart in the suburbs. Higher rents here are justified as you are paying a premium for all the convenience available to you. However, how high can the rents be? Were you offered other amenities such as a fully furnished home or the latest automation facilities or a technologically equipped home? Such amenities do command a higher price but watch out for any artificial pricing. A good way is to check the rent of homes in the society.

Prepare for rent hikes

Rent hikes are often looked at with suspicion — did the landlord do this because he wants to throw us out of the house or because he may be selling it? But in most cases, rent hikes are justified. Do go through the clauses mentioned in your rent agreement and whether it talks about the timelines of rent hike. However, you can get in touch with your landlord if the hike is unreasonable and negotiate. A better way is to understand the market dynamics. Did your neighbours also witness a hike in rent? If not, understand why you should be paying a rent higher than the average rate in the particular society.

Read and make a decision

Not just clauses of the rent agreement, you should read into the formal indices also. For instance, according to a report or a survey, in the locality where you are looking for a property for rent has witnessed a sudden drop in rents. Check in the same survey the reason for this sudden drop and you might find a heavily congested approach road, or a drain in the vicinity, or even poor water and electricity supply. It is not always the size of the apartment that determines the rent, there are other factors, too. Ensure that you gather enough data before you finalise. You could even know end to end about any locality through web portal such as PropGuide and MakaaniQ .

Buy v/s rent

In metro cities such as Mumbai, buying a home may not be an easy choice. For an average family with a regular income, the cost of a house, the interest on a high priced home may be way too much to handle. Therefore, both buying and renting, though not an easy decision may differ from time to time and place to place. Although, a purchase makes you highly secure because it is a cushion, renting in big cities may not be a bad idea when the equated monthly installment (EMI) or the span of the repayment time is way too long. Those living and working in metropolises often choose to invest in its peripheries.

Last Updated: Thu Apr 20 2017

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