New definitions of haves and have-nots have emerged in the city. Those owning plush apartments are the privileged ones, those staying on rents are cowering. The owner-tenant divide is almost as pronounced as the rich-poor divide.
Shishir Baijal, managing director of Kshitij, the realty fund of Future Group, earns a fat, fat pay package, and yet he stands in the queue of have-nots. Having no home of his own, Baijal is in misery. The 3,500 sq.ft flat, to which he has recently shifted, is his second rented premise. And for it, he has to pay a staggering rent of Rs 4 lakh a month.
If Baijal is sulking, Rakesh Tandon (name changed) is grinning ear-to-ear. Nearly four years ago, in 2004, he had taken the risk of his lifetime, and it has paid off. Tandon went for a plush Juhu flat and the EMI for the home loan had initially looked intimidating. Today, with rentals skyrocketing, he reaps a rich profit even after paying an EMI of almost Rs1.5 lakh. His 3 BHK flat fetches him a rent of Rs 2.9 lakh.
Chetan Narain, CEO of Narains Corp and president of the India Institute of Real Estate, is not at all surprised by the steep rise in rentals. "With high rise in capital values, the rental rise was only expected," he said. "In premium locations like Napean Sea Road, Bandra, Juhu, Andheri and Powai, the rise has been as much as 80 to 100 per cent from the 2006-end rentals."
Experts feel that high home loan interest rates and steep property prices have pushed up the rents. "Rentals are always 5 to 6 per cent of the market value of the property. So, with the steep rise in property prices, it is not surprising that rentals have shot up," says Pranay Vakil, chairman of Knight Frank global real estate consultants.
Things could be worse, says SG Maheshwari, estate broker from south Mumbai. "I do not see rentals reducing till the property rates fall," he says.
But Narain says there is hope for the have-nots. "Not much further rise is expected or deserved. In fact, in case of some properties the owners will have to correct their prices," he says.
Mega income
In 2003, Ramesh Patel, a 50-year-old businessman, bought a 4BHK flat in a plush building on 15th Road in Khar. Now, after five years, Patel not only funds the EMI of his Citibank loan from the rent of the flat but also has a surplus.
“I rented out the flat in 2005 for Rs 3.15 lakh a month. In 2007, I was charging a rent of Rs 3.30 lakh a month. Today I earn Rs 3.75 lakh as rent from the flat. I pay an EMI of Rs1.65 lakh,” said Patel. “The rent not only helps me in paying my EMI but also serves as an additional income for me.”
Double take
Thirty-four-year-old Shyam Sethi, a financial advisor, bought a 2BHK flat in 2004, in a plush tower at Lower Parel near Phoenix mills for Rs75 lakhs. He rented out the flat the same year in 2004 for Rs 65,000 per month.
Today, he earns a rent of Rs1.5 lakh, an increase of more than 100 per cent in three years. Though he has no loan against the flat, if we assume that he had taken a bank loan of 80 per cent of the capital value of the flat for a period of 15 years at a 12 per cent rate of interest, his EMI would have been about Rs 72,000.
Neat deal
Gaurav Patil bought a posh 2BHK flat at Pali Hill for Rs 95 lakh against a loan from the bank. He now pays an EMI of about Rs 70,000 to the bank every month. Patil has rented out the flat and earns a rent of Rs1.2 lakh every month from the flat.
Through the rent that he gets from the flat he not only pays off his EMI to the bank but, at the end of the month, he is left with almost an additional Rs 50,000. Thus, the rentals have become an additional source of income for him.
Under license from www.3dsyndication.com
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