Think Twice Before Going for ‘Guaranteed Rent’ Offers by Builders

Builders often use several offers to attract buyers for their property. Sometimes, they also go to the extent of promising the buyer a ‘guaranteed rent‘ and ‘guaranteed tenants’ for prospective buyers. While this has been a common practice for commercial property, this has also been making its way into residential property. However, experts advise property buyers to tread cautiously before they fall for this marketing gimmick.

Builders promise guaranteed rents

Off late, a couple of well-known builders in Mumbai were seen making promises to buyers of paying the rent, if the under-construction project got delayed. One of the buyers was also seen making a promise of paying the rent during the construction period. Some developers also promise to find guaranteed tenants on completing the property. This has been a norm for some time in the commercial real estate space. However, there were some builders seen making the same promises for residential buyers as well. This practice of developers is also expected to increase in coming times, in order to promote their property.

Some developers defend this practice by claiming that it will ease the financial burden on buyers who pay regular equated monthly installments (EMIs). The builders also claim that by doing this, some of the concerns of buyers such as delayed completion as well as finding a tenant are alleviated. According to a builder in Mumbai, a monthly rent of Rs 21,000 on a 2BHK apartment and Rs 28,000 on a 3BHK is guaranteed. This does make logical sense, since most buyers plan their home loans and expenses in line with the promised completion date of the property. If there are any delays, the buyers end up paying more EMIs and their financial planning goes for a toss.

Experts advice caution

While experts are not against these offers, they also advice buyers to tread with caution before they go for these offers. There are several reasons for this caution. One major reason is the enforceability of such an offer. Several times, builders make great promises but fail to keep up to them. A builder may give some reason for not being able to find a suitable tenant. A buyer may want to take a legal course of action, but it will be time consuming and may take years to settle the dispute. It may also be far more expensive than just to stick with the project delay.

One should also consider if the offer is worth taking before taking such an offer, as developers seldom show the entire picture. A buyer must make queries and work it to see if the offer is worth taking. Some experts believe that many buyers are not well-equipped to analyse offers and as such, they must just stick to negotiating a price-per-sq-ft deal.

Experts say that a price-per-sq-ft is far easier to understand and negotiate. If one is still interested in a guaranteed-rent offer, one must also ask for the rates without the facility. Experts suggest that it is important to get these offers in the builder agreement before going for such offers.