Why is it so tough to find rental accommodation in Mumbai?

Amid Mumbai's urban landscape, one enigma stands tall - the soaring cost of rental accommodation. The essentials of life - ‘Roti, kapda aur makaan' are universal, but in Mumbai, securing a 'makaan' proves to be a bank-breaking task.

With the high costs of renting, the aspiration of residing in affluent areas like Worli, Malabar Hills and Peddar Road remains a dream for many. Let alone South Bombay, in suburban areas like Vile Parle, some homeowners ask brokers to cap the rent at non-negotiable rates. If this were not enough, tenants also face bias on grounds of their profession, food preferences and marital status.

High rentals: Owner's bid vs. tenant's willingness to pay

In a conversation with Mid-day, Siddhi Bansod, 27, a middle-class professional tells us: "While searching for an apartment in Vile Parle East, a broker informed us that most of the owners prefer the flat to stay empty rather than negotiate the rent. One homeowner quoted Rs 61,000 for 2bhk and my budget was fixed at Rs 60,000. Despite the minimal difference, he refused to bring it down."

Most of the Parle flats belong to business-class people, particularly from the Gujarati and Marwadi communities. For most of them, property investments are made through multiple revenue sources and they are not entirely dependent on the rental income. Later, the broker revealed how the flat had been empty for the past four months because of non-negotiable and steep rents.

Additionally, the rental prices can be increased yearly at the owner's discretion, informs Amol Ravetkar who manages the Ravetkar Housing Group. "The ability to establish and increase the rent is reserved for the landlord. He may raise the rent by as much as 15 percent yearly for improvements if 70 percent of the tenants consent in writing," he added.

Rohan Pagar is a land trading advisor who primarily deals in properties at Bandra, Khar and Santacruz. He tells Midday that landlords in Bandra can increase the yearly rent anywhere between 5 - 10 percent, and the discretion to do this rests with them. Similar increment rates have been observed in Thane by Pramod Salve, who runs a property management company in that area.

However, homeowners are not the only ones to aggravate this rental fiasco. Mumbai being the financial capital, houses corporate leaders who draw substantial compensation packages. For instance, take the case of Bhasker Jaiswal - The COO of Dentsu India, who pays Rs 2.4 lakh per month for an apartment at Dr Annie Besant Road, South Bombay.

Some individuals in Mumbai can afford to pay exorbitant rents due to a combination of factors. Firstly, Mumbai is home to a diverse range of industries, including finance, entertainment and technology. These sectors offer high-paying jobs that attract affluent professionals, reveals Steven Mathews - a broker based in Parel. Additionally, wealthy individuals, business owners and celebrities often choose to reside in prominent societies for their status and lifestyle, contributing to a demand for premium properties with high rents.

Though Jaiswal's yearly income of Rs 1.5 crore enables him to pay exorbitant rents, there are Mumbaikars whose major chunk of income is spent on housing loans. This brings us to a recent report by Knight Frank India which states that Mumbai has earned the distinction of being the costliest city to reside in India.

As per the report, Mumbai registers a staggering EMI-to-income ratio of 55 percent. This implies that a typical Mumbai household allocates more than half of its income toward paying for home loan EMIs. Such is the case of Abhinav Pathare, who pays a hefty premium against his monthly income of Rs 2 lakh to afford a flat in Hill Crest, Andheri East.

The demand-supply equation becomes the driving force behind the steep rentals in Mumbai, informs Salve. As compared to olden times when there would be only one earning member, most families have disintegrated into multiple earning members. This enhances their paying capacity and thus the demand goes high.

At the same time, Mumbai is a peninsula and can only expand northwards. Rest all directions are blocked by water bodies and therefore, it cannot expand like Delhi or Bengaluru. Hence supply of land cannot increase to match this demand. This is also why Mumbai has the highest number of skyscrapers in India. Hence, due to the high demand and low supply - prices tend to skyrocket, shares Pagar.

Rent topped with monumental deposits

Mumbai's notorious rentals are aggravated by the additional costs of deposits. These upfront payments are equivalent to two to three months' worth of rent which have become a hallmark of Mumbai's rental market. Priya Mehta, a 28-year-old marketing executive, shares with Midday how she was asked to pay a monumental amount of deposit - to rent a 1BHK priced at Rs 50,000 in Lower Parel.

The landlord insisted on a lock-in deposit equivalent to six month's rent, a standard practice in Lower Parel's rental market. For Mehta, this translated into Rs 3 lakh (6 x 50,000) that she had to set aside as a deposit. While she understood the importance of the lock-in amount in securing the property, it was a major drain on her pocket that added to the overall cost of renting.

For many prospective tenants in Mumbai, the shock of the high rental deposit is akin to a financial jolt. In Mathews' experience, it's not uncommon to find landlords asking for deposits ranging from six to twelve months' rent or even more, depending on the locality and the property's value. This practice significantly restricts the options available to renters, as many find themselves unable to muster the required lump sum.

One of the primary reasons behind these sky-high deposits is the limited tenant protection and rent control regulations in the city. Unlike some Western countries where rental security deposits are strictly regulated, Mumbai's real estate market operates with relative freedom in this regard, informs Mathews. Consequently, landlords often demand huge deposits as a safeguard against potential losses due to damage or unpaid rent.

Brokerage - One month's rent, sometimes even more

Just when you thought the steep rental fees and hefty deposits were obscenely huge, there's the added expense of brokerage, equivalent to a full month's rent. Brokerage fee is a common practice in Mumbai's rental market - where the commission is charged from both the landlord and the tenant. What's the rationale behind this, we ask?

Salve calls it a legitimate fee. It's the consultancy and service charge to the broker who had shown flats, negotiated, carried legal agreement registration and aided in police verification. However, when we compared brokerage amounts to the ones in Delhi, brokers revealed that they charge half the price of one month's rent.

The brokerage amount varies depending on the demand-supply equation as well as the locality. For example, in most housing societies of Navi Mumbai, owners don't pay any brokerage, whereas, in areas like Powai, owners are liable to pay one, informs Neel Shaikh - a property dealer based in Goregaon.

Due to a lack of regulation, paying brokerage for a rental house in Mumbai presents a formidable challenge for tenants. Brokers typically demand a commission equivalent to one month's rent, sometimes even more, placing an immediate strain on the tenant's finances. This, coupled with the already high rental rates in Mumbai, exponentially increases the cost of securing a place to live.

Moreover, the absence of standardised fees and a clear regulatory framework means that tenants often find themselves navigating a murky and unpredictable process, where multiple brokers may claim a share of the brokerage amount, further inflating the overall expenditure.

Landlord's biases

Exacerbating the concerns of tenants, there are instances where landlords hold biases against specific communities or categories of people trying to secure rental properties. For instance, take the case of Hera Sajid who encountered discrimination based on her Muslim background, profession in the media field and single status.

While expressing interest in an apartment in Santacruz, the landlord requested her LinkedIn profile to validate her profession. Hera received a rejection shortly after providing this information, suggesting that her identity and occupation played a pivotal role in the decision. This case underscores the staggering presence of housing discrimination faced by tenants.

Ravetkar agrees that bias exists, especially on the basis of gender and marital status. "The bias does take place especially if you are a woman. It has become very difficult for a single lady or even a single man to get an apartment. In today's generation, live-in relationships are becoming quite common and for an unmarried couple, it becomes very difficult to get a rental apartment."

He also adds that the mindset is changing with time. "We are noticing a shift in the past 2-3 years amongst properties owned by the young generation (35-50). These landlords are relatively progressive and have eased the conditions post the pandemic." However, cases continue to surface where tenants get tossed to the margins due to unfound notions.

Despite the progressive mindset, tenants continue to face other forms of bias. Discrimination based on religion, particularly against Muslim or minority tenants, exists because of their eating habits. "Most of the Muslims consume non-vegetarian food, and the smell can be intolerable to some people who are pure vegetarian, especially Jains," shares Ravetkar.

Professionals in certain fields, like the media industry, modelling and film production are not preferred as tenants. They might face scepticism because of their infamous lifestyle and odd working hours, informs Pagar. Additionally, freelancers are also rejected due to an inconsistent source of income which may lead to delayed rent payments.

The rental market in Mumbai can be highly competitive, and these biases not only limit housing options for affected individuals but also perpetuate social inequalities and divisions within the city. Efforts to address and eliminate such biases are crucial for promoting fairness and equal housing opportunities in Mumbai's real estate landscape.

To address the issue, Ravetkar opines that both parties can benefit from effective communication. "Problems won't be resolved if there is lack of communication between the tenants and landlords. Often, cleaning and maintaining the property is a major source of disagreements. Sometimes disagreements may occur over the expense of the repair or mending rather than the cleaning and repairs themselves. Hence, transparent conversations gain primary importance."