Bengaluru's Rental Market Surges 30% as Zero Deposit Scheme Offers Relief

Bengaluru's rental market sees a 30% increase in rents, driven by the return-to-office mandate, with tenants facing 7-10 months' rent as a security deposit. A zero deposit rental scheme is launched as a solution, requiring tenants to pay a nominal fee and augmented rent for access to properties.

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Nitish Verma
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Bengaluru's Rental Market Surges 30% as Zero Deposit Scheme Offers Relief

Bengaluru's Rental Market Surges 30% as Zero Deposit Scheme Offers Relief

Bengaluru's rental market, provide has witnessed a staggering 30% increase in rents, driven by the return-to-office mandate that has fueled demand for rental properties. As a result, tenants are facing the daunting prospect of paying 7-10 months' rent as a security deposit to landlords.

Why this matters: The surge in rental prices and the introduction of zero deposit schemes have significant implications for the affordability and accessibility of housing in Bengaluru, which can have a ripple effect on the city's economy and social dynamics. This trend may also influence the rental market in other cities, leading to a broader impact on the country's housing sector.

In response to this challenge, a zero deposit rental scheme has been launched in Bengaluru as a potential solution. Under this innovative scheme, tenants sign a rental bond with the landlord and a third-party executor for a nominal one-time fee. The rental bond serves as a guarantee for landlords, providing them with financial security in case of tenant default.

The zero deposit rental scheme operates by requiring tenants to pay an upfront yearly premium of around 6% of the probable deposit or bond value, which is equivalent to the minimum return on investment. Additionally, tenants pay a premium of up to 10% on rent for access to zero deposit properties. This augmented rent, combined with faster rental turnovers and credit-verified tenants, serves as a compelling incentive for property owners to participate in the scheme.

To illustrate how the scheme works in practice, consider a scenario where the monthly rent is ₹10,000. Under the zero deposit rental scheme, the tenant would pay ₹10,500 (almost ₹500 more every month) and a one-time payment of ₹3,600 when signing the rental bond. This eliminates the need for the tenant to pay a substantial ₹60,000 as an upfront security deposit to the landlord.

Amit Kumar Agarwal, CEO and Co-founder of NoBroker.com, explains that the zero deposit rental scheme aims to bridge the trust deficit between landlords and tenants by offering security to landlords. "Tenants get to pay a one-time amount as fees only at the time of executing the rental bond," Agarwal states.

The zero deposit rental scheme has gained traction in Bengaluru, with a recent survey by NoBroker revealing that 35% of tenants in the city are willing to opt for this arrangement. Currently, 5% of rental properties in Bengaluru are being leased through the rental bond, which has been active in the market for almost a year.

However, some real estate experts express concerns about the scheme's viability, suggesting that landlords may be hesitant to rent their properties without a security deposit. The security deposit acts as collateral against any wear and tear or damage that the tenant may cause during their tenancy.

As Bengaluru's rental market continues to grapple with the challenges posed by the 30% increase in rents, the zero deposit rental scheme offers a potential solution for tenants seeking relief from hefty security deposits. While the scheme has gained some traction, its long-term success will depend on its ability to address the concerns of both landlords and tenants in the evolving rental landscape.

Key Takeaways

  • Bengaluru's rental market sees 30% increase in rents due to return-to-office mandate.
  • Tenants face paying 7-10 months' rent as security deposit to landlords.
  • Zero deposit rental scheme launched as a solution, with 35% of tenants willing to opt-in.
  • Tenants pay 6% of probable deposit or bond value as yearly premium under the scheme.
  • Long-term success depends on addressing concerns of both landlords and tenants.