Economic Crisis hits Rental market

The far-reaching affects of the global economic meltdown can now be seen even in the rental market of the national capital. You may not believe this, but it is true — even landlords in posh areas where senior executives of MNCs reside, are feeling the pinch. If the realtors are to be believed, many deals are increasingly failing at the last stage due to the ‘slowdown’ factor. The major reason for this serious situation is that, now, landlords have started asking for a three-month compensation if tenants decide to leave the house inside the stipulated period. Generally, landlords rent out their place for a period between 11 months and 33 months. This particular rider is really tough even on those who earn a handsome salary. Rajat Mahajan, vice president of global realty advisory Century 21 India, says that the job of even senior executives are no long safe in view of economic meltdown. Many of them have been given the pink slip over the last couple of weeks. It goes without saying that in this scenario, accepting the above demand is not at all easy for them. They would have accepted it in normal times, but not when situation is so alarming. It is said that the landlords of the national capital are resorting to this practice because many tenants have vacated their rented place after the market meltdown. Some of these highly placed tenants were even sacked by their companies. In view of these developments, landlords say that for their new tenants, they are asking for a threemonths compensation if they leave their accommodation before time. Landlords argue that they have to spend a lot of money in renovation jobs, every time that a tenant vacates their premises. Even if somebody lives in their house for only three months, they have to spend money on renovation in order to attract a new tenant, they claim, and obviously, they cannot afford to spend so much of money every five-six months. For a complete renovation job, one has to spend almost Rs 60-70 thousand for a floor built on a house of 200 sq feet. Before meltdown, at the time of rent agreement, both parties had a clause in the rent agreement that stipulated either party to serve one month’s notice, before operation quit. It seems the landlords are no longer interested in this clause. They are asking for more. Deepak Joshi (name changed) says that as recently as a few months ago, tenants used to throng him as and when his Lajpat Nagar house fell vacant. After the market meltdown, he is not finding any tenant who can pay even Rs 25,000 for his vacant first floor house. Of course, businessmen are coming, but he is only interested in taking in working professionals. Says Kajol Makhijani of Mak Realtors: “The rider is proving to be the major problem area in clicking deals. I think landlords will continue to ask for compensation till they are sure their new tenant will not leave them before time.” Quoting the recent report of industrial body Assocham, Pankaj Tyagi of Bhanu Infrastructure Pvt Ltd says that if its predication proves right, it would be really bad for the rental market in the national capital. In that scenario, many tenants living in posh colonies would be forced to vacate their houses. The reports says that after Diwali, India Inc is set to show pink slips to 25-30% employees in businesses like IT, aviation, steel, financial services, real estate, cement and construction as part of their cost-cutting measures. According to experts, a large number of professionals working for these companies live on rent in posh areas, both in Delhi and NCR. Naturally, if professionals on this scale are given the pink slip, they will not be able to afford such huge rents and would certainly vacate these rental spaces. This will deal a body blow to landlords in these posh localities. After all, it is not that easy for just anybody to dish out a rent upwards of Rs 30,000 a month. For their part, many landlords may keep their place vacant rather than give it to somebody on less than the prevailing market rates.