Renting property in India has been a lucrative way of earning passive income on assets you own. Getting a house, coworking space, or office on rent is also popular because its a pocket-friendly way of using a space, and because buying property almost always requires a loan (which can be crippling for some).
The country’s rental real estate market is beyond lucrative. In urban India alone, 21.72 million households are rented. The IMF’s latest estimates of the nation’s rental market also state that the market is worth more than USD 20 million. However, fraudulent activity and a lack of regulation in the market have been inhibiting the property rental segment’s growth. And while policy frameworks and regulations fall under the government’s ambit, being wary of important metrics while renting property is something you can personally work on to reap the most benefit from leasing property to tenants.
How To Rent Property in India - Process
1. Be Aware of the Laws
Property is a sensitive asset that is protected by a complex web of central and state laws. These laws protect you against a host of litigation problems that can arise in relation with security, identification, faulty paperwork and more. For instance, the Model Tenancy Act states that the landlord/lady cannot visit the tenant at the rented residence before 7 AM and after 8 PM. Being aware of these laws can help ensure that you’re not only a good and legally compliant landlord/lady, but also stay out of unnecessary litigation troubles.
2. Get Landlord Insurance
Sometimes things don’t go the way we plan. You may hand over a well-functioning, fully checked home to a tenant and one of the pipes in the kitchen may suddenly burst. Since this is not what the tenant signed up for, s/he/they can sue you. To avoid having to shell money, you should get landlord insurance. Some popular landlord insurance companies in India are Bajaj Allianz, HDFC Ergo, Bharti AXA, ICICI Lombard, SBI, IFFCO Tokio, and Reliance.
3. Check Your Property For Safety
Regardless of whether you get insurance to cover tenant complaints or not, it is your moral duty to check the property for any livability problems before leasing it. If it requires repainting, cleaning, or renovation work, complete it before handover unless the tenant is in a rush and insists that s/he/they will carry out renovation and/or changes themselves. If the tenant insists on this, mention what duties s/he/they agreed upon in the rent agreement.
4. Price Your Property Carefully
Pricing your property the right way is important to leverage the market to your advantage. Your rental price shouldn’t be too high or too low than the average rent rate. This rent rate varies from area to area due to a number of different factors that make property in that area more or less valuable. It is therefore important to ask around what the current rent rates are in the locality in which your property is situated.
5. Find the Right Tenant
Finding the right tenant for your property is a time consuming and tedious task, especially if you require funds or a stable side income ASAP. Thanks to the internet, you can list your property for rent online and promote your offer as well to attract tenants. Rest assured, you’ll land someone who takes good care of your property soon enough. Top sites for finding tenants online are 99acres.com, Magicbricks.com, NoBroker, Flatchat, and Nestaway.
6. Verify the Tenant
Not running a thorough police verification of the tenant is a punishable offense according to Section 188 of the Indian Penal Code. You can verify the tenant by requesting address proof and bank documents. For address proof, you can use Aadhaar, PAN, driver’s license, electricity bills, and water bills. For bank detail verification, request the tenant for a canceled cheque or bank account statement that displays the account name, account number, and IFS code clearly.
7. Form a Rent Agreement
Always draft a landlord-tenant rent agreement and duly sign it. The rent agreement states all the terms and conditions that will protect your interests as well as of the tenant’s. The agreement should include the rent amount and by which day of every month it should be paid, the rental security amount and under which conditions it has to be returned to the tenant, the tenure of the rent, and what to do if a dispute arises. To make sure that the agreement has legal binding on all involved parties, it should be issued on stamp paper.
8. Open a Digital Escrow Account for Security Deposit
Since scams related to rental security deposit and tenant verification are rampant, it is advised that you open an instant digital escrow account to collect the security amount from the tenant. This way, tenants will also feel much more assured about depositing the security amount with you. This is because a digital escrow account is an agreement-based third party account used to park funds securely. Through this account, the tenant can deposit the rental security in escrow instead of paying the landlord directly. At the end of the tenure, the tenant can be returned the security amount from the escrow itself. Due to its third-party nature, an escrow account makes sure that the interests of all parties using the account are duly protected.
9. Set Up a Digital Rent Collection Method
For added convenience, you can set up a digital and/or automated rent collection setup through a rent collection service company. eWallets like PayPal, Venmo, and Cash App often have the feature of adding a direct deposit functionality to your account. Through this, you can make a rent request and receive it in your bank account directly. You can also choose to avail the services of specialized rent collection sites such as Azibo, Zego Pay, HousingAnywhere, and Avail.
10. Register the Lease
Section 17 of the Registration Act 1908 states that registration of a lease is compulsory if the tenure lasts longer than 11 months. In addition to that, you should always register your leases because only those litigation problems that arise in connection with a registered lease can be resolved in court.
11. Maintain Digital Records of Everything
The world is increasingly becoming digital, and so should your personal record maintenance. Make sure you have a digital copy of all verification documents and agreements involved in your lease transaction. If possible, keep them on a cloud software that has a digital locking system (such as password protection) for added security. Guaranteed 100% protection for your docs from getting eaten by rats.
12. Get Emergency Contact Info of the Tenant
Emergencies and contingencies can arise anytime. You should therefore maintain a record of emergency contacts of tenants – along with their addresses if possible – so that you can communicate any problems that may arise. Emergency contacts are often the tenant’s friends and close relatives.
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