Rental housing in India is primarily an urban phenomenon. This is largely due to the concentration of large numbers of migrant populations in urban clusters. It allows migrants to continually change their workplace with changing workplaces, manage their household finances, be close to workplaces, and send more money home. Delhi NCR is one of the few urbanized states that has a higher percentage of households (28%) residing in rental accommodation, above the national urban average (27%).
The rental housing market in Delhi is characterized by the coexistence of several sub-markets. Low cost rental accommodation is mainly available in Jhuggi-Jhopri slums/clusters, followed by urban villages, unauthorized settlements and planned settlements.
It is interesting to explore how the market for low-end rental housing works in urban villages because while residents of slums or JJ settlements rarely have formal rental contracts, urban villages are the markets where formalization has started (followed by unauthorized and planned settlements). settlements). Monthly rental values in this particular segment (Urban Villages) range between INR 5,000-15,000 and provide rental accommodation for students, professionals and low-income workers in the city.
Navigating Rental Housing in Urban Villages: The Rise of the Broker
Urban villages play an important role in providing low cost rental accommodation in Delhi. These areas are delimited as ‘Lal Dora‘ in the planning document, where planning standards are generally relaxed. It allows residents to build different types of housing by maximizing the horizontal and vertical space available. The housing typology includes semi-permanent housing, multi-storey permanent pucca houses and pacca rooms with shared toilets and metered water.
Read more: Lal Dora: The invisible red thread limiting the lives of “urban villagers” in Delhi
The majority of low-income households in urban areas of India reside in rental accommodation without having a formal tenancy agreement. However, the urban villages of Delhi exhibit a contrasting history where there is a constant need for the formalization of the tenancy agreement. This has led to the emergence of the class of brokers, who not only bridge the communication gap between landlords and tenants, but also act as “proxy landlords” in the presence/absence of landlords.
So, whereas landlords previously rented their property directly to tenants, today they prefer to use a broker to find potential tenants and arbitrate the rent-setting process. Every few meters in an area there is an office of ‘real estate dealers’ who rent. Apart from property dealers, there are other people such as owners of Kirana (grocery stores) and restaurants, security guards also working as part-time brokers.
The broker normally charges 15 days to one month rent (about INR 2,500 to 15,000) as brokerage to the tenants. Their key role is to keep information on vacancies available for rent in the village area and to bridge the gap between tenants and landlords.
Once a room becomes vacant, landlords notify a few local brokers to find suitable tenants. Then, information about vacant houses for rent is spread among local brokers by “word of mouth”. Brokers who are able to close a better deal (ie bring in tenants who will stay longer and have a stable source of income) close the deal first.
Some of the brokers also have close ties to landowners; they take full responsibility for replacing tenants when someone leaves the room. However, this is more common in the case of absentee owners. In addition to bringing in new tenants, brokers also take care of the property in some cases.
A broker from the village of Khirki told us: “If a tenant creates problems after the house has been rented, for example, if he has a fight, does not pay the rents on time, refuses to leave the room despite the termination of the rental contract. , or run away without paying rent, then it is up to the broker to deal with it”. This makes brokers a kind of ‘chowkidar’ of a rented property, a fact mentioned many times by several brokers.
Why do landowners want brokers?
The emergence of brokers in urban villages is influenced by a dual process occurring city-wide – an increase in the number of crimes and the growing need for registration of tenancy agreements.
Delhi’s criminal landscape has pushed landlords to rent their property through brokers to reduce the risk of crime by tenants of the rented property. A broker operating in the village of Munirka told us: “There have been many hadsa (crimes) that have happened in the past — one tenant murdered another, an accidental death in the rental unit, tenants killed landlords over rent disputes, tenants hid in their homes. room after a theft or kidnapping, etc. All of these incidents are reason enough to strike fear into owners’ minds and make them reluctant to rent out their property without a broker.
He also confirmed that if a ‘hadsa’ (crime) occurs after the property is rented through a broker, it is the broker’s responsibility to handle the situation.
The other factor that has contributed to the emergence of brokers in urban villages is the growing requirement for documentation. A broker from the village of Khirki told us: “Previously, very few people would register rental contracts. But as more and more people started to formalize their tenancy agreements, it increased the burden on landlords, which they now pass on to us. Now it’s our job to make it easier to police check tenants and register rental agreements.
The increasing need for documentation is also indirectly enforced by the judgment of the Delhi High Court, which makes police check mandatory for the rental of residential property. According to the judgement, violation of such a rule by the owners would be considered an offense punishable under Article 188 ICC (i.e. one month imprisonment or a penalty of INR 200, or the of them). Therefore, owners prefer to engage with brokers to reduce the documentation burden.
Does the emergence of brokers create a financial burden for tenants?
Although the active presence of brokers in the rental market has mutually benefited landlords and brokers, it actually creates an economic burden for potential tenants.
Read more: Moving in Mumbai is tedious. Here’s how you can make it without a broker
A tenant residing in Khirki village and working in Saket mall as a security guard pointed out that “there are many websites where rooms are available without engaging with brokers, but these are above my budget. I preferred to rent properties in urban villages, due to the relatively lower rental costs in these areas, but the involvement of brokers has now increased the amount of one-time investment (security deposit, one month’s rent and combined brokerage) required to obtain a room here.
This also indirectly prevents tenants from changing rooms frequently in the rental market, as they have to pay the brokerage fee each time.
The presence of brokers also reduces the scope for negotiation between landlords and tenants at the time of rental. In an interview, a renter residing in the village of Munirka and working in a shop told us that “while renting properties, brokers try to make attractive deals with landlords due to competition between brokers. However, this has inflated the rental value and reduced the room for negotiation between landlords and tenants.
The emergence of brokers in urban villages has thus become a sort of double-edged sword. On the one hand, they facilitate the rental process by acting as “proxies” and mediators. On the other hand, they increase the economic burden on tenants, who have to pay the brokerage and also lose their bargaining power, thus affecting access to low-cost housing.