Housing rentals imbroglio

The January-March quarter of 2009 witnessed a drop in rentals in many metros. From mid-2008,as the job market weakened due to a slowing economy,tenants affordability declined. But landlords refused to revise rentals downward. By the second half of 2008 the market had taken a U turn: from being landlord-driven it became tenant-driven. Rentals fell in search of the right level that would evoke interest among tenants,says a research report by property consultancy Jones Lang Lasalle Meghraj JLLM.

According to another study done by 99acres.com,a website that lists properties, barring select markets,most cities saw a fall in rentals in January-March 2009 compared with October-December 2008. The percentage decline in rentals,however,was lower than the decline in capital values. Rentals declined in Delhi-NCR,Mumbai,Kolkata,and Chennai,but rose slightly in Hyderabad and Bangalore. Explaining the decline in rentals,Vineet Singh of 99acres.com says,Owing to the economic downturn,many companies were retrenching. Corporates were cutting down all superfluous costs,and hence avoiding relocation of personnel. All this affected the demand for rental housing. And in order to avoid paying brokerage,landlords preferred to continue with the same tenants. As for the rise in rentals in a few cities,he says,Only in places where there was supply constraint did we see a slight increase in rentals.

DO THE DUE DILIGENCE

While renting an accommodation,the tenant needs to verify certain documents. First,he should check the title document,which tells you who is the real owner of the place. Next come electricity and municipal bills. The tenant needs to ensure that these have been paid and there are no dues. If he thinks it necessary,especially in case of high-end housing,he could have the built-up area of the house verified using the services of a qualified architect.

Landlords,too,need to confirm a few things. While fixing the rental value,they need to find out the current market rate for similar accommodation in that area. Some degree of flexibility while negotiating the rental rate also helps find a tenant more quickly. Landlords should be clear about the period of the lease. They should also have all important documents at hand for verification.

LEGALITIES amp; PAPERWORK

Both the landlord and the tenant should pay close attention to the rental agreement. It is essential to prepare the rent deed in order to avoid litigation between the tenant and the landlord,most often due to the tenant refusing to vacate the property or refusing to pay market rent. In the deed,the terms of tenancy are laid down and the termination clause mentioned. It then becomes safer from the landlords point of view to rent out the property.

It is not compulsory to consult a lawyer for preparing a deed; a good draftsman can also do so. But since there are so much litigation,it is preferable to use the services of a lawyer,especially one who is an expert in property matters so that he takes care of all the legal nuances.

The rental agreement is a legal form that has to be completed,signed and dated by the tenant and the landlord. The legality of this agreement is ensured if it is registered by paying the local duty. If the period of tenancy is 11 months,then registration is not required.

In a rent agreement,details of the person who would use the premises,conditions pertaining to usage commercial or residential,activities permitted,fittings and fixtures permitted,renewal clause,termination clause,and every other possible issue is mentioned to ensure that the landlord gets the property back in good shape when the lease period ends. Details regarding payment of rent and bills electricity,water,municipal and other incidental charges are also mentioned. The lease agreement also mentions the period of lease,the deposit amount,and the monthly rental.

Most residential lease agreements are for 11 months. With a notice of two to three months,either party can terminate the agreement in advance. The lease can be renewed every 11 months based on mutual consent. Both the parties get a copy of the document once it is signed.

NEED FOR REFORMS

Property experts believe that rental laws in the country need to be amended in order to protect the interests of the landlord as at present the laws are skewed too much in favour of the tenant. Anurag Singh,a Delhi-based Supreme Court advocate,says,Zoning laws,rent control laws,and legal protection to tenants have damaged the rental housing market in India. They have led to large parcels of land in city centres remaining idle that could otherwise be made available for housing and commercial outlets. Landlords are often reluctant to rent their premises for fear that they might not get them back. This results in a large number of properties remaining vacant a huge waste of resource in cities starved for rental space.

In cases where tenants have occupied a property for a long time,revising the rent becomes difficult. Since rentals stay low,landlords refuse to spend money on maintaining the property. The result is that these properties fall into disrepair.

Theres a need to revise old tenancy laws,removing constraints on increase of rentals and empowering owners so that they are able to reclaim their properties without any court proceedings, says advocate Anurag.

With property prices soaring high,there is a need to reform the laws related to rental housing. For some time now,the idea of offering tax-related incentives so that the supply of rental housing increases has been doing the rounds,but no government has so far acted on it. These measures will go a long way in boosting housing rental market. l

praveen.singhexpressindia.com