What are the brokerage charges for renting a flat in India?

The demand for rented homes is increasing in several cities, including the top metropolitan cities and several tier 2 cities, owing to the growing jobs and educational opportunities. Home seekers in India are increasingly searching for rented properties online as the process is much simpler and one can find a suitable home without the involvement of brokers. However, hiring brokers, especially if you are a first-time renter, can be beneficial as they can help you find the best property based on their knowledge and experience, providing a renter with numerous options to explore. Real estate agents or brokers typically charge fees for their services and facilitating the property deal. Among the various hidden costs while renting a property, brokerage charges lead to significant expenses both for a renter and the landlord. Hence, it is essential to understand these costs before you decide to rent a property anywhere in India. In this guide, we share the brokerage charges for renting a flat in India.

See also: How do you identify a good real estate broker for home buyers?

What are brokerage charges?

Brokerage charges refer to the fee that real estate agents or brokers charge from brokers and landlords for the services rendered and for helping close a real estate transaction. Brokers provide services for renting and purchasing/ selling properties for which these charges are applicable.

Factors that impact brokerage charges for renting a property in India

Rental rates in a location

Typically, brokers charge a minimum amount equivalent to one month’s rent from renters and landlords and a maximum of 3 months’ rent in some cities such as Mumbai and Bangalore. The rental rates vary from city to city and locality to locality within the same city. Hence, the brokerage charges also vary according to the prevailing rental rates. Moreover, broker charges tend to be higher if properties are located in prime localities, such as business districts.

Rental tenure

One should note that rental brokerage charges also vary according to the rental tenure. For example, if the rent agreement has been created for more than one year, the brokerage charges may increase from an amount equivalent to one month to 45 days or two months.

Property type

Brokerage charges also depend on the type of property. Typically, the rates are higher for commercial properties than residential properties. Further, if it is a residential property, the brokerage rates will vary depending on whether it is furnished, semi-furnished or unfurnished.

Market trends

Since market trends influence rental rates and property values, the same is applicable to brokerage charges in a particular area.

Brokerage charges for renting in top eight Indian cities

Tips for negotiating brokerage charges

• Analyse market rates: Start researching the prevailing brokerage rates in your location to understand the current market trends and avoid overspending on broker fees. Based on this information, you can negotiate with your brokers.
• Negotiate after shortlisting properties: To avoid limiting your property options, it is better to start the negotiation process only after you have identified the most suitable rented home based on your needs. Make sure to explore various properties and shortlist a few options.
• Understand the services offered: Brokers not only help in finding property options for prospective tenants, they also provide additional services such as rental agreement preparation, tenant’s police verification, property inspections, repair and maintenance, etc. You may negotiate and ask them to lower rates if they do not offer these services.
• Share responsibilities with co-tenants: If you plan to share the apartment with other individuals, a common trend seen in metro cities, this will reduce the task for the broker to find co-tenants in shared rental accommodation. Thus, you can negotiate the costs further if you share this responsibility.

How to minimise brokerage charges?

• Find a flatmate: Prospective tenants, especially working professionals and students, can significantly reduce their rental expenses and broker fees by sharing the accommodation with flatmates.
• Compare brokers: You can approach different brokers when searching for a rented home. You can compare their fees and choose a broker with affordable brokerage charges.
• Negotiate: When hiring a broker, it is important to understand the type of services they offer. After considering the different factors, such as location and market trends, you may negotiate the charges with the broker.
• Find a rented home online: An effective way to reduce broker expenses when renting a property is to find one directly through online platforms. Such platforms allow prospective tenants to interact with owners with the need for brokers.
• Find a rented home through networking: Connect with your friends, colleagues or community groups to find a rented house. This will eliminate the need for brokers.

Factors to consider before hiring a broker

• RERA registration: According to RERA regulations, real estate agents/ brokers must register with the state RERA and have a valid registration number. Make sure to check this point when hiring a broker to avoid any hassles.
• Broker services and fee structure: When selecting a broker for your property search, ask key questions regarding their services and the applicable charges. This will help set your expectations clear and prevent you from paying for unnecessary services.
• Track record: Brokers with a successful track record will likely better understand their customers’ needs. They may provide you with multiple options to help you find the best property based on your requirements.
• Effective communication: Ensure the broker maintains good communication throughout the process and responds to you promptly. Moreover, they should be able to convince the tenant’s terms with the landlord when finalising the agreement clauses.
• Availability and presence: Typically, it is convenient for tenants to find brokers who are easily reachable on calls or platforms such as WhatsApp. Make sure to consider the broker’s availability and flexibility. Check if the broker can adjust to your timings and is readily available for property visits.
• Online reviews: If the broker has an online presence, one can also check the online reviews or check with friends before finalising a broker.

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When renting a property, it is crucial to understand the brokerage costs as that will impact your overall costs. Potential tenants should also be aware of the prevailing market rates. Otherwise, negotiating broker service fee can be tough and one is likely to overspend.

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