Hidden costs tenants incur when renting a property

One may opt for a rented house when moving to a new city for a job or educational opportunity. As a prospective tenant, one should consider several aspects, such as choosing the right property in a favourable location and completing the documentation without any hassles. Besides planning the budget for the rent one must pay, estimating the hidden costs is another noteworthy point, tenants should not overlook when renting a property. In this guide, we discuss the various hidden costs involved when renting a property.

Upfront expenses when renting a house

#1. Security deposit

Security deposit refers to the amount of money landlords charge from the tenant before allowing them to occupy the property. As the name implies, a security deposit serves as a security against any unforeseen circumstances when the tenant uses the property. It is a refundable amount that the landlord retains until the end of the tenancy. When the tenant leaves the property, the landlord must refund the security deposit. However, they can refuse to do so or deduct a certain portion from this amount if the tenant is liable for any property damages. Typically, landlords ask for a security deposit equivalent to two months’ rent, which must be paid at the time of signing the lease agreement. This is an upfront and one-time expense a tenant must pay. Depending on the rent for a property, one should estimate the security deposit amount when calculating the budget.

 #2. Moving costs

Once a prospective tenant has finalised a property for rent, they must assess the expenses involved in moving. Most renters opt for professional moving and packing services while relocating. This is much more affordable and hassle-free than the DIY method. However, moving and packing costs will depend on the quantity of belongings that need to be shifted, as well as location, distance, and other factors. The moving costs from one city to another may range from Rs 5,000 to Rs, 60,000. Relocating within city may also have a similar price range from Rs 5,000 to Rs 35,000.

#3. Costs for interiors

Relocating often involves furnishing the interiors and setting up utilities in the new house, including furniture, appliances and other elements. The cost of fixing the electric appliances, gas connection, plumbing, etc., is also often borne by the tenant. The total expenses could vary depending on the size of the house and the needs of the tenant. Interior design for modern apartments ranges from Rs 2 lakh to Rs 15 lakh. Nowadays, one can rent furniture online, which could be an affordable option when temporarily relocating to a new place.

#4. Brokerage fee

If you are hiring a real estate agent to find a rented property, you must pay a brokerage fee. Typically, brokers charge one month’s rent from the tenant and landlord. However, in some cities such as Bangalore and Mumbai, brokerage charges may be up to three months’ rent, while Delhi-NCR could be up two months’ rent. The fee may vary depending on factors such as location and it can be negotiated. One should also note that rental brokerage is also based on the rental tenure. So, if the rent agreement is drafted for more than one year, the brokerage charges of one month may increase to 45 days or two months’ period.

#5. Rent agreement registration cost

When getting a house on rent, the landlord and the tenant sign a rental agreement a legal document mentioning the terms and conditions of the tenancy. As per the law, registration of property documents in government records, including rental agreements, is mandatory and a stamp duty is payable under Section 3 of the Indian Stamp Act, 1899. In India, the tenant normally bears the cost of preparing a rent agreement and stamp duty. They are responsible for registering the rent agreement as per local laws. However, the rent agreement cost can be borne by the landlord or shared between both parties. Stamp duty on rental agreements varies in different states in India. Hence, prospective tenants should check this value when renting a property.

Click to read more about stamp duty on rental agreement

Recurring costs when renting a house

#1. Utility bill payments

Generally, a tenant is responsible for paying utility bills, such as electricity, water, cooking gas, etc.. These expenses will depend on the terms of the rental agreement. In some housing societies, water and garbage collection are often covered under society maintenance charges. Hence, the tenant should carefully read the terms and conditions of the rent agreement to understand their total liabilities. Utility bill payments must be made regularly, such as monthly. Similarly, there are other utility bills that a tenant would have to pay, such as internet and cable charges and housekeeping services. Prospective tenants should make provisions for such expenses in their monthly budget before renting a property.

#2. Parking, maintenance and other charges

A tenant may have to pay additional parking charges if the apartment does not include parking space. Moreover, additional parking charges may also be applicable if the tenant owns more than one vehicle. When renting a property, it is better to check with the housing society about these parking charges.

A tenant is also liable to pay society maintenance charges, which may or may not be included in the rent. In cities like Mumbai, the rent quoted by the landlord will consist of maintenance charges. If one rents a house in a premium gated community, the maintenance charges will likely be high.

Some developers charge a monthly fee for club membership, regardless of whether the member utilises the facility. Tenants should check if these charges are applicable when renting a property.

#3. Commuting or miscellaneous expenses

In addition, there could be some miscellaneous household expenses a tenant may need to consider when calculating their budget. For example, the daily expenses involved in commuting to the workplace, school, or college could be significant. One should also make provisions for any emergency expenses or repairs in the house.

 #4. Repair expenses

Typically, a landlord is liable to undertake the necessary repairs before renting out the property. They are also liable to bear the expenses of any major renovation or repair work undertaken after the property is rented out. For example, a broken window, leaking plumbing fixtures, cracked tiles, etc., must be fixed by the landlord. However, if the tenant is found liable for such damages, then it is the tenant’s responsibility to undertake these repairs and bear the expenses. In addition, expenses for minor repairs in the house, additions of electrical fixtures, etc., must be borne by the tenant. In some cases, such expenses can be shared between the tenant and the landlord based on mutual agreement. When setting up a budget for renting a property and allocating monthly provisions, it is wise to consider such unexpected costs that may occur.

Tips to reduce hidden costs when renting a property

• Choose a property near the workplace or college: The tenant can significantly reduce the daily commuting expenses by choosing a rented home close to the workplace or college.
• Negotiate security deposit: Tenants can speak to the broker and negotiate the rent and security deposit charges by landlords if they find the cost is higher than the market rate.
• Inspect the apartment before renting: Potential tenants should thoroughly inspect the house and check for any issues, such as cracks on the wall, leaking faucets, non-functional electrical fittings, etc. They must request the landlord to fix these issues before moving in. They must also ensure the house is repainted and cleaned before they shift, thus saving unwanted expenses.
• Share apartment with roommate: One can choose to share an apartment with another renter and split the costs of utilities and other expenses.
• Report maintenance issues to the landlord: Tenants should ensure that they report maintenance issues promptly to landlords, say a wall seepage issue, which will prevent complications and save costs both for the landlord and the tenant while preventing any disputes.
• Check housing society regulations: Tenants should check the housing society rules and regulations, such as payment of maintenance charges, etc. This could save them from penalties.

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When renting a property, prospective tenants should conduct thorough research. This includes checking the neighbourhood for connectivity and proximity to workplaces, educational institutions, etc. and availability of essential amenities. They should also conduct an inspection of the property and notify the landlord if any repair work is required. Besides, they need to be aware of the local laws to avoid any disputes with the landlord. These precautions will help them save on unnecessary expenses.

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