Use these points to negotiate for lower rent during the pandemic

Ashwini Kumar Sharma

Many people are facing pay-cuts and job losses and paying high rent is worsening their cashflows. If you find yourself in such a situation, evaluate your options and don’t hesitate to negotiate with the house owner. Here are a few ways you can go about it.

Discuss the financial crunch

The pandemic has impacted people from all walks of life. Those facing financial difficulties may be finding it hard to pay the rent, which is typically 10-20 per cent of the take-home salary; or even more in metros. Therefore, a tenant should first discuss with the house owner.

“This depends on the relative situation of both parties. In situations where a tenant has lost his job, it makes sense to request the landlord to either postpone the rent or reduce it, based on mutual relationship. The tenant is a custodian of the house and if he has played his role well, it makes sense to request the landlord on humanitarian grounds for assistance,” says Amit Kumar Agarwal, chief executive officer and co-founder, NoBroker.com. “On the other hand, if the tenant has not lost his job and the owner is, say, a retiree who earns the bulk of his income from property rental, then it makes sense for the tenant to continue paying rent and agreeing to inflation-linked rent-increase at the time of agreement renewals,” adds Agarwal.

Rent amounts have come down

If your landlord does not agree to reduce the rent due to your financial distress, make him aware of the market situation. According to various reports and experts, rentals have decreased during the pandemic. “In the rental market, the average ‘asks’ have dipped by a slight margin as several tenants sought rebates and discounts on account of financial instability,” says Maneesh Upadhyaya, chief business officer, 99acres.com.

The work-from-home trend is also playing a role in rentals. “We are witnessing a drop in rents in expensive markets such as Mumbai’s high-end properties. Moreover, with work-from-home becoming a norm, we are seeing a lot of demand from the peripheral areas of key residential markets due to affordability and fresh supply,” says Sudhir Pai, chief executive officer, Magicbricks.

Many cities and specific localities have seen a steep decline in rental rates. “We saw a drop of 5-10 per cent in rentals in April and May. In Bengaluru, the April-May drop was 10.3 per cent in Ramamurthy Nagar, 9.2 per cent drop in Whitefield and 7.2 per cent in Hebbal. Electronic City too saw rentals drop 5.7 per cent and Bommanahalli 6.8 per cent,” says Agarwal. Some parts of Mumbai too have seen a fall in rentals. In Panvel, for instance, the decline has been 8.3 per cent for the April-May period, says Agarwal. For Santacruz this was 6.7 per cent, for Andheri East 6.2 per cent, for Goregaon 5.2 per cent and 4.9 per cent in Thane West, he added.

In July, however, rents are rising again. “They are up by up to 5 per cent from the pre-COVID levels,” added Agarwal.

The cost of leasing out

The last option that you have while negotiating with the landlord is to make him realise the effort and expense he would need to put in while letting out the property afresh. Of course, there is always the risk of the house lying vacant for long, plus an agent may have to be paid to find a new tenant (usually one month’s rent).

Moreover, it is unlikely that a house owner will find a better-paying tenant in the current situation. Try to explain that given the pandemic and the restrictions on movement, finding a good tenant can take longer than usual. If the house remains vacant for 2 months, it would cost the house owner about 17 per cent of the total annual rental income, in terms of refurbishing before renting it further. Apart from that, the landlord may need to spend on painting and repairs to make the house lease-ready. So, agent commission, delay in getting a tenant, painting and repairs can together easily cost the house owner 25-30 per cent of the annual rental income. If the house remains vacant for long, losses will be much higher.

Do your homework

Before you speak with the owner, familiarise yourself with the market conditions. Get an idea of the rents being charged for houses in your locality for a similar property. Also, get an idea of the number of properties available on rent. Talk to other tenants and ask them how much they are paying and if their landlords have agreed to bring down the rent.

You may also contact local property dealers or explore realty websites to get an idea of the rentals and available properties. You have a good chance of convincing your landlord and bringing down the rent if there are enough rental options in your locality.