Heavy deposit or zero rental flats have increasingly become popular in Mumbai. The trend that had earlier picked up the pace in the extended suburbs of Mira Road and Vasai-Virar has gradually gained prominence in other parts of the city as well.
People looking for rental accommodations in Mumbai are steadily getting drawn towards the zero rent scheme, especially millennials with transferable jobs. To apprise, the zero rental flat scheme allows the tenant to live in a flat without paying rent during their stay.
Under normal circumstances, a tenant pays the monthly rent, along with a security deposit for the flat. However, in the case of zero rental flats, the tenant does not pay any monthly rent. Instead, the owner charges a hefty amount as a deposit, depending upon the location of the property. This amount is returned to the tenant once the tenancy period is over, provided that the flat is in good condition. The landlord can deduct some money in case of property damage or unpaid utility bills, if the same is incorporated in the rental agreement.
As per Tauqeer Hashmi, Proprietor, Maharashtra Properties, “Nearly 30 percent of the people seeking rental accommodations in Mumbai are willing to go for heavy deposit flats to save monthly rents. The amount of heavy deposit charged by the landlords depends upon the prevalent rental rate in a given area. It is usually 100 times of the monthly rent. For instance, for a flat that is available for Rs 20,000 per month, the heavy deposit amount would be Rs 20 lakh. Similarly, the amount would be Rs 30 lakh for a flat which is let out for Rs 30,000 per month.”
Benefits of zero rental flats
The heavy deposit flats work well for both the tenant and the landlord. For tenants, these offer an excellent opportunity to save on the monthly rent, especially in a city like Mumbai, where the rentals are exorbitantly high. Moreover, the tenant gets back the deposit in full if the flat is maintained well.
On the other hand, the owner gets a huge amount initially, which can be used and invested elsewhere. In the traditional home renting process, paying for the utilities, such as electricity and water bills, is often a hassle for the owner, particularly in the last month of the tenancy. Moreover, every time a tenant vacates the property, the landlord needs to spend a lot on repairs since new tenants insist on basic maintenance of the house. At such times, a deposit of Rs 25,000-50,000 provides no resolution. These requirements can be done away with as the owner can deduct the expenses from the deposit amount.
According to Manju Yagnik, Chairperson, Nahar Group, “The trend of zero rentals or heavy deposit has been there in Mumbai for quite some time. However, it has become more evident these days as the required inventory is drying up steadily in the market. The scheme is a win-win situation for both the flat owner and the tenant. A heavy deposit frees the tenant from the hassle of monthly rental payments and safeguards the owner against property damage. Usually, it is seen that the amount collected from such flats is reinvested by the owners in another assets or bank deposit schemes. Moreover, with heavy deposit flats, it becomes easier to extend the period of tenancy as the owner already has the security deposit amount in bulk. The trend is especially prevalent in the prominent micro-markets of Mumbai, such as Mulund, Chandivali, Bandra, Goregaon, Malad, and Andheri East.”
While the concept of heavy deposit flats is beneficial for both the landlord and the tenant, the flip side is that the tenant needs to shell a huge amount as an initial deposit. This might cause a financial strain, especially during the current times when layoffs and salary cuts are increasingly becoming evident as a result of the COVID-19 pandemic.
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