Thursday, December 11, 2014

What landlords need to know about renters given the sluggish real estate market?

Author: Sachin Gupta | Find me on Twitter

If you’re a landlord owning a residential or commercial property for the purpose of renting it out, then you’re probably well aware of the rental market. Demand is limited but there is ample supply of real estate including the office space properties and residential houses. So, your property would fetch less. Except for the markets of Bangalore, and Pune, rental market is sluggish across all other cities in India.

A look at the commercial office space market in Gurgaon. See how rents have fallen across micro markets during the period of July - September 2014.

source: Magicbricks

It’s a buyer’s market to say the least. As renters sit comfortably in the driver’s seat, here’s what else they are up to:

  • Saving money:

Renters who are looking to rent out office space or residential houses are able to save more in current market scenario. Barring the places like Pune, and Bangalore where there is steady demand for real estate, all other markets across the country are in downturn. Renters are getting office space or residential property at a substantial discount, thereby, able to cut their operating expenditures.

  • Negotiating harder:

Renters are able to negotiate hard with landlords. Whether they are looking to rent office space or residential property, tenants are taking their time, sometimes months to finalize the deal. By doing so, they are being able to get substantial discounts on rent paid to the landlord. Many well settled tenants have also moved out of their existing properties to get new spaces at lower rates.

  • Getting lucrative deals:

A rent deal these days is not just about rent and maintenance charges. Tenants are having a considerable say in the use of common facilities of the building. In addition to getting price cut on rent, tenants are bargaining for free car parking spaces, shorter lock-in period, and less upfront money which goes out in form of security deposit & advance rent. For example, a typical office space deal in past would have standard lease terms of 3 years lock-in period, 6 months security deposit. However, tenants are now negotiating hard for 12 months lock-in period and security deposit of just 3 months.

  • Getting posh facilities:

Common facilities such as toilets, corridors, parking spaces, reception, signage boards, etc. are being renovated by the landlords to attract renters. In some instances, landlords are going out of their way to provide high quality interior work for furnished office spaces and residential properties.

Keeping all these factors in mind, many prospective buyers are also evaluating the pros and cons of renting versus owning. And in many instances, buyers are postponing their decisions to buy real estate and instead they are opting for lucrative rental deals.

Have any Questions?


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