News Karnataka
Monday, June 17 2024
Bengaluru

Brokers Consider Deposit Free Rent to Reduce Rental Woes

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Zero-deposit rentals are growing in popularity in Bengaluru against the backdrop of skyrocketing rental deposits, which have increased by 20% this quarter, particularly among the millennial and Gen Z cohorts.

At the moment, landlords in the city request a security deposit equal to six to ten months’ rent; this can total up to Rs 2.4–4 lakh for a rental property that costs Rs 40,000 per month. Furthermore, deposits for upscale apartments in areas like Indiranagar or Koramangala might reach Rs 15-20 lakh.

According to local brokers, new hires moving to Bengaluru frequently lack the funds for such large payments. As a result, a number of potential renters are looking at renting without a deposit.

Tenants who choose the zero-deposit option pay an annual charge up front that is equal to the lowest possible return on investment.

Experts note that there is always a catch: a larger monthly outgo—even though this could help Bengaluru’s rental dilemma.
Bengaluru is currently experiencing a rental affordability issue, according to Amit Kumar Agarwal, CEO and co-founder of NoBroker.com. Premium properties are demanding deposits as high as Rs 30 lakh for a 4BHK flat, making it more difficult for tenants to find accommodation.

Bengaluru is currently experiencing a rental affordability issue, according to Amit Kumar Agarwal, CEO and co-founder of NoBroker.com. Premium properties are demanding deposits as high as Rs 30 lakh for a 4BHK flat, making it more difficult for tenants to find accommodation.

“The financial strain of making such large deposits when potential tenants move to the city and start a new career is frequently measured in lakhs. In these situations, they choose to rent these deposit-free properties, where the renters pay, on average, six percent or more of the total likely deposit each month, according to Kumar.

Experts claim that a rental bond, which guarantees landlords emergency funds (premium) in the event of a dispute or rent default by renters, binds the premium.

Although it is a relatively new idea for the city, Bengaluru-based Hanu Reddy Realty vice president Kiran Kumar said he has seen a number of tenants already asking for lower-deposit properties.

“While the deposit-free rental model is still in a very nascent stage in the city, we have seen several landlords already offering lower rentals to make the apartments affordable,” he stated.

However, it appears that only a small portion of Bengaluru’s tenants—35 percent, according to a recent NoBroker survey—are prepared to choose zero-deposit rentals, which may indicate that there is little knowledge of the new model.

This method is currently used to lease out 5% of the city’s rental properties. Interestingly, the zero-deposit rental market has grown 400% year over year in 2024 thus far, demonstrating the growing although relatively newfound appeal of this option among both landlords and tenants.
According to Kumar, landlords will only accept a zero-deposit agreement if the rent is greater.

“We have been brokering several apartments in Indiranagar where the landlords decided to lower the deposit significantly, however, only if the tenant paid a 15-20 percent higher rent,” he stated.

Similar thoughts were expressed by Agarwal, who stated that certain models fetch 5–10% greater rent on the NoBroker marketplace.

Without a doubt, this model is becoming more and more popular, particularly for premium properties where the rental deposits are much greater. However, the higher rent is not the only drawback of this model. The yearly premium in this instance is not refundable, but the tenant’s paid rental deposit is.

Accordingly, experts claim that although this can help with cash flow when there are large deposits, it doesn’t deal with the underlying issue of the city’s exorbitant rental market.

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