No deposit, no rental fee, only an fixed deposit

The surging interest rates on bank deposits have opened up a new scheme for the real estate sector.

Departing from the common rent and deposit permutations, landlords in some areas of the city are now demanding only a fixed deposit from the renter as payout for the duration of the lease. The concept came into vogue earlier this year, when interest rates on bank deposits began climbing, from six per cent towards double digits.

The practice is gaining popularity, especially in areas with low-income group housing, where the rent is less than Rs10,000. For instance, in the Mhada colony in Mankhurd the going rate for a one-room-kitchen is a fixed deposit of Rs3 lakh as the rent for the same is Rs2,500 per month.

"While the landlord earns an interest of Rs2,500 per month on a rate of 10% per annum, the tenant only has to pay the corpus for the FD without paying any rent every month," said Mithalal Raka, a Mankhurd consultant, adding that while the flat owner gets a bigger amount as security for his property, the tenant gets his entire principal amount back at the end of the stay. "It's win-win for both parties," says Raka.

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This arrangement not only spares the landlord the monthly rounds to collect the rent, but also the hassles of following up with individual tenants, in case the house is occupied by bachelors or girls sharing an apartment. "Each of the tenants give their share of the fixed deposit amount and at any time, when one of them has to move out, the landlord just returns the fixed deposit of that person without altering the terms of lease for the others," said Dinesh Makhija, a consultant from Antop Hill, where the system is popular with tenants occupying homes in CGS quarters.

Another segment in which the FD system is popular is that of tenants from the trader fraternity. "Since they have easier access to cash than to institutional funds, they prefer paying the FD amount in cash so that they do not have to make any rent payments through cheque, nor does the landlord have to take the risk of collecting the rent in cash," said Manik Patel, a Govandi-based estate agent.

However, it is feasible only for low-rental areas. "It becomes unpractical for areas where the rent is more than Rs10,000 per month, since the deposit would go up to Rs12 lakh," says Patel. Other areas where it is popular include Sahakar Nagar in Chembur, MHADA colony in Jogeshwari, Asmita society in Malad and Airoli-Ghansoli in Navi Mumbai.

Source: [dnaindia]