Bangalore Tenant Trap - Advance aka Security Deposit

#Please note in the post Advance and Security deposit used inter-changeably.

History

Tenant pays advance amount to the landlord as a security for the infra-structure in the house like furniture, cub boards, bath room and electrical fittings, etc. While vacating if anything is damaged and Tenant left as it is then Landlord can detect equivalent amount from advance.

High Security Deposit (aka Advance)

Most of the Metropolitan cities and major towns, tenant must pay advance amount. Normally it would be maximum 2 to 3 months of agreed rent amount. Example: If rent is Rs.1000/- then advance would be Rs.3000/- But in Bangalore, it is 10 months' rent. You should surprised to know that a decent 2BHK apartment rent would be Ra.20,000/-** That boils down 2 lakhs as advance. Why only in Bangalore, advance is so high? Bangalore rented houses mostly furnished. So it needs bigger amount. Well, now-a-days, most of the houses are "semi-furnished" but advance amount remains high. (semi-furnished article follows ;-) )

Interest

If you few thousands as advance then there is no need to worry about interest component. Whereas, if advance is Rs.2,00,000/- then you will be suffer significant amount on interest. That too, if you stay at a same house for many years then compound interest (interest on interest) will apply. Mind it, advance is always interest free. While vacating you will not even receive what you have paid as advance. Read entire post for further details.

Token Advance

The deal officially freezes only if Tenant pays token advance. It may be around Rs.5000/-. Most of the time tenant will not get any receipt for it. If Tenant decides not to go ahead with the deal, then token advance will not be returned.

Brokerage 

The Finder's fees aka brokerage would be 1 month rent. This must be paid while paying token advance itself if you go through an agent.

Rental Agreement

Landlord will issue rental agreement after you occupied the house. This rental agreement duration is for only 11 months. Tenant must pay the cost of preparing rental agreement which may be around Rs.500/- (as on Dec 2016). Rental agreement is the only legal proof for the advance paid. Needless to say, mostly Tenant only shows interest to get this one as quickly as possible. The terms in the agreement will be loosely inferred to support landlord in case of any dispute. Example: Maintenance, deductions while vacating, etc. etc. The rent will be increased to 5% to 10% after 11 months irrespective of any new addition in amenities.

** May differ location to location. But this would be around 20k.