Rental bonds can create a well-knitted real estate community

Rental bonds

Rental bonds can create a well-knitted real estate community

Rental bonds

Rental bonds: For most Indians, owning a home has always been a dream. The country’s social fabric has long been woven around the family’s financial security being linked to homeownership. However, the trend appears to be shifting. A large portion of today’s generation would rather rent a home than commit to a long-term mortgage. Apart from the shift in preference from ownership to renting, increased demand for rental housing has also resulted from work-related mobility.

Landlords have a responsibility by the tenancy agreement to collect a security deposit when renting out their property. This security deposit, which can range from 2-3 months’ rent in Delhi NCR to 6-8 months’ rent in places like Mumbai and Bengaluru, aims to protect the landlord in the event that the tenant fails to meet his obligations. Payment of rent, utility bills, property damage, or the tenant vacating the property before the lock-in period expires, resulting in financial losses for the landlord, are all examples of default.

The security deposit is the only form of security available to the landlord. The laws currently in effect lag behind, and landlords consider them to be pro-tenant. Moreover, the landlord has no means of assessing the credibility of the tenant at his disposal. As a result, landlords are choosing to leave their properties vacant rather than deal with difficult tenants and brokers. According to a Knight Frank report, there were over 11 million vacant houses across the country.

Obviously, a better solution than a security Deposit is necessary for residential renting. Rental Bonds can help you with that!!

What exactly are rental bonds?

Simply put, a rental bond is a guarantee to the landlord that protects him if the tenant fails to meet his tenancy agreement’s obligations. The bonds are purchased by the tenant, who is the beneficiary.

While the rental bonds can be customised to the requirements of the landlord and the tenant, they usually cover the following
  • Unpaid Rent
  • Amount due for rent for the balance of the lock in period
  • Unpaid utility bills
  • Damages to the property over fair wear & tear
Benefits to the landlord

The landlord has the assurance of a credit verified and assessed tenant because the surety company conducts extensive due diligence prior to issuing the rental bond. The landlord also has the freedom to specify the amount of the bond, or penal sum as you might call it, that he believes will adequately cover his risk.

Benefits to the tenant

It also works for the tenant. During the tenancy, the security deposit he deposits with the landlord remains locked up. Rent bonds only require a small guarantee fee, so the landlord can keep his liquidity for more important things. Furthermore, where a tenant must move from one house to another, rental bonds will eliminate the need for the tenant to put up a security deposit while waiting for the previous security deposit refund.

It is a huge relief, especially since the pandemic has emptied many families’ bank accounts.

ALSO READ: Why Rental Properties Are Still A Profitable Business

What’s more?

The landlord and the tenant now have the opportunity to carry forward their good tenancy track record to their subsequent tenancies thanks to the rental bond. Combined with the Rental Bonds, India’s recently passed Model Tenancy Act institutionalizes residential rental in India.

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