Mumbai: No takers for their flats, owners slash rents for first time – ET RealEstate

MUMBAI: A G Mehta never had a problem finding tenants for her flat near Andheri station. Regardless of the rent she demanded—the last time it went for Rs 32,000—the 450-sqft flat used to be snapped up quickly. The lockdown changed the whole dynamic.

Struck by job losses and massive salary cuts, many tenants left the city in the early phases of the lockdown. Some others found it more convenient to work out of their hometowns.

With more and more offices embracing the option of working remotely even after a majority of the restrictions have been lifted, landlords are struggling to find takers for their flats at rates set before the pandemic.

This has not only compelled many to lower their expectations and offer concessions like longer leases so that some income keeps flowing in, but has also given tenants the upper hand in deals—a trend that’s not been seen in Mumbai’s residential rental market in decades. Desperate to hold on to their tenants, many other landlords are waiving rent hikes stipulated in contracts and are also reducing rents.

While Mehta said she’s willing to go as low as Rs 25,000 just to ensure that her flat no longer stays vacant, Prashant Gandhi, who owns two flats in Ghatkopar and Borivali, said he’s already cut the amount by 20 per cent for prospective tenants.

S Jain, who owns a flat in Worli, said advertisements on real estate search portals are also getting bleak responses. “We used to be flooded with calls after putting up an ad, but the ones who are making enquiries now are being extremely cautious. I’m in negotiations with some people.”

Yashika Rohira from Karma Realtors expects this trend to last a while. “The pandemic has had an overwhelming impact on people’s financial conditions. Residential property rents in new and existing agreements have reduced due to a drop in demand. The affordability factor also comes into play. Prices have dropped 5-20 per cent.”

The climbdown isn’t restricted to landlords. Brokers—often accused of being ruthless in charging as much as a month’s rent as their service fee—are also willing to take lower ‘cuts’ just to ensure that deals don’t fall through. Rozario Lancy Lobo, a real estate broker, said the commercial rental segment, too, has seen a decline—of as much as 30 per cent.

Tenants said it was about time that Mumbai’s real estate market— one of the most expensive in the world—underwent a cost correction in the face of a global pandemic. Torsha Sen, an art director who moved homes during the lockdown, said she was able to find a flat in Parel, a prime location, at 20 per cent lower than the usual rate. “This would not have been possible prior to Covid-19’s outbreak.”

Tanya Mishra, a PR consultant who shares a flat in Goregaon with two others, said she was due for a rent hike, as mentioned in the contract, but the landlord decided against it. Soumyodeep Ghosh’s landlord did one better: he readily accepted a request to slash the rent for the Marol flat where he has lived for the last three years by 20 per cent.

It’s the change in the demeanour of property owners and brokers while house-hunting that took Jojo Jose by surprise. “I’ve lived in several rental homes, but never found owners this willing to negotiate on the rents. Some of them even called me back several times with offers lower than what they initially quoted.

Earlier, a Rs 2,000 reduction was the most they would agree to. A few are also approaching me directly based on my searches on websites,” said Jose, who is looking to move out of an apartment in Andheri. “I’m going to make the most of this scenario as long as it lasts.”

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Empty houses galore in Bengaluru – ET RealEstate

BENGALURU: If you move about the city now, it will be quite common to see the boards ‘house for rent’ in most localities. Ever since Bengaluru has been in the grip of a pandemic, there has been a surge in vacant houses. Many house owners claim that they are trying to reduce the rent to attract tenants but it is hard to get one.

According to house owners, there are multiple reasons for the houses to be vacant. Firstly, when the lockdown was announced, many workers residing in Bengaluru (mostly in rented houses), moved out of the city citing a job loss and no payment. As many of them are yet to return, those houses have no takers.

Secondly, the vacancy is found mostly in tech corridors or those who were working in tech companies. One of the major reasons for this trend is that as “work from home” (WFH) was announced, many either moved to their native place back to their parents’ places. Thirdly and most importantly, since covid had struck, many have lost jobs especially those working in hotels, hospitality and other sectors.

Shiva Kumar, who owns a number of houses and shops around the city said, “Many of my houses and commercial shops are now vacant. I decided to reduce the rent by 10 per cent but need to wait for a few more months before we can see a demand.”

T Sudheer Babu, who owns a house in Panathur said, “I used to rent out my house for Rs 25,000. But, with WFH being the new normal, many of them have returned to their homes. Now, I am renting the house for RS 20,000 plus but haven’t found potential tenants.”

Basavaiah, who used to sell ‘gobi manchurian’ on the streets said, “As you know, people hardly eat on the streets anymore and with no job, I have no money to pay rent. So, I had to return to my native.”

Rekha Aradhya, who used to reside in Indiranagar has moved to her hometown Tumakuru ever since lockdown was announced.

B Shankar, who owns a house in HMT layout said, “There is a demand from tenants to reduce the rent. I agree that there is job loss and we need to be empathetic to their cause. But, no one is looking at the issues faced by house owners. I have taken heavy loans to construct a house as rent is my only source of income. Out of six houses, three are vacant and three others are asking for reducing the rent. Now, how will I repay the loan and how will I run my family?”

Many also say that when there was an IT boom in the city, many areas in and around the tech corridor saw the rents spiking. One of the major reasons for that was that techies wanted to stay closer to their office so that they could beat the traffic. However, with WFH being the new normal, many have preferred to shift to low income areas due to low rent or to their native places. Sri Vatsa who used to stay near Jalahalli had moved to Electronics City in a rented house as it was closer to his office.

However, since lockdown, he has come back to his parents’ house as it is as good as working wherever one wants to. Shilpa Radhakrishna who used to stay in Indira Nagar has now moved to her house in Yellapura, Uttara Kannada district. Initially, she used to have problems with electricity. Now, she is successfully able to manage her work with a generator and UPS in place.

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Lawyers redraw rent agreements with new ‘lockdown’ clause – ET RealEstate

MUMBAI: Property owners have begun inserting a lockdown clause in new agreements with tenants following disputes over payment of rent for the lockdown period.

Fresh agreements being drawn up by lawyers mention that in case of a lockdown there will be no waiver of rent or mention a mutually agreed percentage of the rent that could either be waived or deferred.

The new agreements are being drafted for both residential and commercial properties as both — property owners and tenants — seek clarity in case of another lockdown disrupting life.

The lockdown clause has gained importance as force majeure clause — a common element in any contract which essentially absolves both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties occurs does not mention lockdown or a pandemic.

After the country was put in a lockdown late in March, halting nearly all commercial activity for close to two-and-a-half months, tenants began defaulting on rent payments. When demands were raised by landlords, disputes ended up in court, jeopardising years of business relationships.

Confirming that clients are increasingly demanding lockdown clauses in their new rent and leasing agreements, a senior official with a leading international property consultancy, who did not wish to be identified, said: “Yes, clients are making this demand for new contracts. Basically, they want force majeure clause modified to include pandemic-related impact as well as government-enforced lockdown scenarios.”

Advocate Prakash Rohira, who specialises in real estate, has so far drafted at least ten revised agreements with a lockdown/pandemic clause — eight for commercial properties and two for residential. He said that while in commercial properties, owners are willing to offer a waiver, in residential properties owners want it made it clear that there will be no rent waiver under any circumstances.

Rohira said leave and license properties in Mumbai yield annual earnings (based on market value) of 2-3% for residential and 4-6% for commercial, which is lower than fixed deposits. “There is very little room for any negotiated settlement here. So, newer leave and license agreements through various preferred words clearly state that the License Fees will be payable whatever the circumstances,” he said.

Advocate Utkal Deshmukh of DB Legal said that they have received several requests, especially from tenants, for the addition of the pandemic as a force majeure clause in their future contracts. “The pandemic as clause will be case specific as it will have different implications and contractual obligations for different parties, subject to the agreement between them,” he said.

Trivankumar Karnani, a lawyer who practises at the Bombay High Court, said courts will end up hearing a lot of cases of rent agreement violations. “The lockdown has disrupted the real estate rental business. It is not surprising that both property owners and tenants are now seeking a remedy. And that remedy is reframing of contracts with a force majeure clause.”

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