Unable to pay rent amid lockdown? Here are steps to tide over woes

Negotiate or request your landlord to adjust rent against security deposit, if it is sizeable

No one in New York can be evicted for not paying rent until August 20, 2020. But, that's the USA, not India. Here, the Supreme Court on Tuesday refused to entertain a plea seeking direction to the Centre to ensure compliance with the Ministry of Home Affairs (MHA) order. This order had directed landlords to neither ask students and labourers to vacate the premises, nor seek rent for a month during the Covid-19 lockdown. In short, irrespective of where you stay in India, you won't get any moratorium on paying rent. 

A moratorium on rentals would not be fair to landlords, say experts. According to Mani Rangarajan, group chief operating officer, Housing.com, Makaan.com and PropTiger.com, “Many old people live off the rental income they make. It wouldn’t be reasonable to not pay rental to such people. Banks can afford to offer moratoriums, landlords may not." Moreover, landlords have financial burdens of their own. Adds Rangarajan: "The rental yield in India is around 2.5-4 per cent. Many landlords pay home loan EMIs and maintenance charges out of the rent they receive.” 

Negotiate with your landlord: Now is the time to make the most of your negotiation skills, especially if you've been a model tenant, and the landlord is financially sound. Says Amit Kumar Agarwal, co-founder and CEO, NoBroker.com: “If the tenant has been punctual with rent payments, and if he is a long-standing tenant, and the owner's position is sound, the latter may understand that the tenant is going through a genuine problem. Postponement or temporary reduction of rent could be ways through which owners can reduce their tenants’ financial burden.” 

 

 

If the landlord isn't willing to reduce the rent or offer a grace period, ask him to adjust your rent against your security deposit. Says Rangarajan: “Tenants can do so, especially in places like Chennai and Bengaluru where the security deposit is equivalent to 6-10 months’ rent. In Mumbai it is typically four-six months. Pay a part of the rent and adjust the rest.” 

Take a short-term loan: If you can't afford the rent, move to a more affordable accommodation once the lockdown ends. For your current rental needs, you may have to borrow. Ideally, you should borrow from your family or well-to-do friends as the loan from them could be interest-free. But if that's not possible there are a few other options, like a personal loan or a short-term loan from a fintech company, that you can explore. A personal loan has a minimum duration of 12 months. The rates range from 9.5-24 per cent.  
 

If you need money for a shorter period, check out short-term loans (see box). Getting such loans might be easy or difficult, depending on whether the lender offers e-KYC facility and the Covid zone — green, orange or red — you are stuck in.

Another option is to pay rent using your credit card and utilising the additional credit period to settle the amount. Says Rangarajan: “The amount is transferred to the landlord's bank account directly. People can get around 40-45 days of credit. They can also earn points and cash back on some credit cards.” If you don't revolve the credit, this route can work to your advantage. Players like NoBroker.in, CRED RentPay, Housing.com, etc help you avail of this facility. They charge a few hundred rupees for this service, and the whole process can be completed online. You get the rent receipts via email, which you can use as proof to claim tax benefits. Says Rangarajan: “If you pay only minimum amount and revolve credit on the card, you will end up paying a significant rate of interest — around 35-40 percent.” 

Explore month-to-month option: As far as possible, try to reach a win-win solution with your landlord. But what if your landlord does not cooperate, and you are genuinely in distress, say, because you have lost your job and are unable to get a loan? Says Niraj Kumar, partner, DSK Legal: “The terms of the contract are supreme. If the terms are not met, strictly speaking, the person is liable to be evicted after the lockdown is over, especially in a green zone.” You can't say you are unable to afford the rent and keep occupying someone else’s premises. 

But what if you are stuck in a house in the red zone, and your agreement has expired? Here you can take resort to a provision called month-to-month tenancy or tenancy at will. Says Kumar: “Either party can terminate this tenancy with one month’s notice.” In fact, The Indian Contract Act 1872, Section 2(e), defines an agreement as "every promise, and every set of promises, forming the consideration for each other is an agreement." 

Ideally, there are two types of agreements — oral and written. Says Kumar: “The Contract Act basically also envisages an oral contract. In situations where there is no contract or written document, it is basically observed by the performance of the parties.” Here, the continued occupation of the premises by the tenant will render the house basically as an arrangement of month-to-month tenancy, or tenancy at will. Says Kumar: “This is not guided by the earlier document because the occupancy is on the basis of external factors and not on account of the will of the tenant.” 

Like it or not, you will have to figure out a way around this issue. If stuck in a lockdown, moving may not be possible. Try to make use of this time to look for cheaper options online.