by Mr. Santhosh Kumar, CEO – Operations & International
Director, JLL India
India’s cities are
growing and creating wide spectrum of opportunities. This means that there are
a lot of people flocking to these cities in search of jobs, higher studies or
just for a more cosmopolitan lifestyle.
In other words, today’s
real estate market is flooded with prospective renters. The sky-high property
prices in the larger cities are keeping the ‘buy’ option out of the reach of
the common man, so the rental market is booming.
Not surprisingly,
countless investors are invested in or entering rental real estate. Their
objective is to purchase homes and then rent them to tenants.
The problem is that many
first-time landlords are unaware of the potential risks associated with renting
out a property – particularly a residence. Renting out a house in India does
not always result in smooth sailing - if not approached diligently, it can
become a serious headache & often a nightmare.
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| Santhosh Kumar, CEO – Operations & International Director, JLL India |
The most common problems
that first-time landlords encounter include:
1. Finding new tenants, especially the
right kind
2. Delay in payment of rent
3. Misuse of the property by the tenant
4. Tenants refusing to vacate
5. Tenants not paying maintenance fees (if
the rental agreement requires them to).
As the rental season has
just begun in India, the time is right to examine the points that a first time
landlord should keep in mind while renting out a house to avoid hassles later.
Deciding On The Rent..!
It is always essential
to ascertain the correct rental amount for your property. In such a competitive
market, you cannot ask for more than the prevailing market rate.
To ascertain this, you
need to do a thorough check of the area’s current rental rates, and price your
rent competitively. Only if your property is well-maintained, fully furnished
and offers that extra ‘luxe’ factor can you can charge a consummate premium –
and even that needs to be logically calibrated.
Getting The Property
Insured..!
A savvy landlord gets
his rental property fully insured. A landlord is always at risk because he is
not the one controlling the property, but the tenant.
Landlords should consult
with their insurance agent to ensure they have the maximum amount of liability
coverage for their property.
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Listing the property..!
Once you have decided
the rental amount for your property, the next step is to list the property on
the market. You can do that by either listing on online portals or / by
contacting local agents.
If your rental property
is an upscale apartment or a bungalow which will fetch a higher rental, a
property consultancy should be roped in to help you with the leasing.
Drafting The Rental
Agreement..!
Every rental agreement should
be in writing and registered. The rental agreement should provide the term of
the lease, monthly rental amount and security deposit. It should specify also
all the terms and conditions such as who will pay for utilities water,
electricity and maintenance charges.
The purpose of tenancy
should be clearly mentioned, such as whether the property is being used for
commercial or residential purpose. If the rental agreement is set to expire and
you and the tenant agree to extend the term of the lease for a specific period,
then the extension should be in writing
Registering The
Agreement..!
After preparing the
agreement, the most important task is to get it registered. It is necessary to
register the rental agreement because only then it can be used as evidence in
the court in case of any legal action.
The amount to be paid
for registration and the stamp duty may be borne by the landlord, or it can be
paid mutually depending on the situation.
Police Verification..!
This is one of the most
essential parts of the process which helps in background check of the tenant.
Not running a background check is a punishable offence under Section 188 of the
Indian Penal Code.
The landlord has to fill
the verification form, obtainable from the state police department website. It
must then be submitted to the local police station along with identification
proof of the tenant. The local police then conduct the background check and
give approval for the rental agreement.
Non-discrimination
Against Prospective Tenants..!
A savvy landlord will
not discriminate among potential tenants on the basis matters such as religion,
gender, familial status, profession or dietary preferences.
There are certain
situations where refusal to rent out the property is justified, but this at best
a grey area and every instance of refusal needs sound justification in the eye
of the law.
Summary..!
Apart from the above, a
landlord should invest the time and effort to conduct periodic checks to make
sure that the tenants are not violating any laws or the terms and conditions of
the agreement, and to verify that the property is safe.
Investing in rental real
estate can be a profitable proposition, but it is by no means a passive
process.
First-time landlords in particular must fully acquaint themselves with
the intricacies of a rental situation so that there are no causes to regret
later on.
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