Dealers convince landlords that they can obtain a substantial upfront payment from renters. PHOTO: ONLINE
“The demand for houses is at its peak and rents are at an all-time high.”
These are the words of a property dealer I recently came across while searching for a house in Islamabad.
With a rental budget of Rs 20,000-25,000 per month, I was expecting to have plenty of options from which to choose, but gradually, I found this was not to be.
I began to realise that property dealers, who already collect commissions as high as 50 percent of the total monthly rent, are greedier than they appear.
To mint more money, the dealers convince landlords that they can obtain a substantial upfront payment from renters — for which the dealers of course demand an increased commission in exchange.
To attract people’s attention, dealers claim that the rental home market has an occupancy rate of 90 per cent, and urge you to look at many of the houses up for rent.
Once you express interest in a house and ask the property dealer to finalise the details, his response will invariably leave you in a state of shock.
“Great my friend, now you just have to pay eight months’ rent up front and a month’s rent as security, as the homeowner has demanded”
When you attempt to bargain for a concession on the demanded rent upfront, the typical response is “Okay, just give me six months’ rent and the security deposit up front”
“It’s frantic out there,” said the property dealer, when I pressed him to give me a concession on the rent due up front for a house I liked.
“This is the height of the rental season. If you don’t pay six month’s rent in advance, you are unwelcome,” he said grudgingly.
After getting frustrated with the rental search, I realised that one has to compromise and cough up at least five months worth of upfront payments.
This is not the end of the ordeal. While signing the lease agreement with the landlord, the renter is forced to accept that there will be at least ten per cent added to the current rent after one year.
At the end of the year, the renter inevitably finds the property dealer at his doorstep asking for a renewal of the original agreement and his commission.
Given the levels of frustration with the apparent “scarcity” of options, a family has no choice but to give in to the property dealer’s demands.
The flush of black money in the market, particularly money made through ‘lesser vices’ such as prostitution and bootlegging, is another unfortunate cause for the upsurge in rental prices.
“Foreigners also have a role in jacking up the rental market. They are always ready to pay upfront amount for one year, and in certain cases, for two years,” Irfan, a property dealer in G-9-1, said.
“Some foreign nationals are even generous enough to meet the demands of the landlord and the property dealer. White-collar and middle-class citizens of this country have no choice but to grumble at their bad luck as citizens of this ‘Pak’ land,” he said sarcastically.
“Urgent legislation is needed to discourage the flow of black money into real estate, and to bind property dealers and landlords to follow set rules for rented houses,” said Muhammad Yousuf, an advocate at the Islamabad High Court.
Yousuf said many wealthy Afghan nationals stay in Pakistan without proper documents and are a major contributor to the increase in rents.
“White-collar families have been left in the lurch, at the mercy of property dealers,” he said.
Published in The Express Tribune, March 18th, 2013.
COMMENTS (9)
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This proves no other city in Pakistan is more welcoming than Karachi. Long live Karachi!!
So its everyone elses fault that they are prepared to pay more than you and driving house prices up? Why dont we shut down all businesses and kick out all the foriegners living in Islamabad ? That will drive the prices down so you can afford a nice house in F-7. There is something called supply and demand which decides the prices in a free market.You wont find anyone complaining that their range is Rs 20000 - 25000 but the house prices in Central London are too high. If you cant take the heat get out of the kitchen. Move to Rawalpindi.
This is a one sided story with many flaws. Tell me what a landlord is to do if the tenent does not pay rent? I have had tenents in Karachi who did not pay rent for 2 years straight and did not want to leave either. They always threatened me with their political affiliations and at the end, I had to pay them 0.2 million rupees to vacate my house. Needless to say, I am a property owner in Dubai now and won't even think of investing in the Pak realestate market. In Dubai, I get rent upfront for the full year and gets me alot of peace of mind.
Went through same experience and in the end I had to settle down on a relatively old flat close to Pindi.
The real estate market is as abused and manipulated by the brokers as the stock market is. Prices and rents go up on a daily basis, which is totally artificial and being pushed purposely by the brokers. They not only make commission as a percentage of the rent or price but are also large investors themselves and therefore have direct interest in high prices. Exactly like stock brokers. This needs to be regulated by the Government, but then what do you when the country is being run by 'dalals' - property and stock both.
I would fully agree with the author on his experience - this is exactly what I've experienced as well. Additionally, the house owners don't want to show ownership papers when they rent out the property - generally to avoid income tax liability. This is also true for these property dealers. In most cases the excuse is that the 'owner is abroad or in another city' and dealing through a proxy.
LOL! its like, you rented a house for the first time. Its perfectly normal my friend.
A good piece of journalism should always present all sides of the story. The one above does not, so I will take the liberty:
Let's look at the same story from a landlord's & property dealer's point of view (I wish I was one, alas I am not!).
Inflation is at 10% - that's the mimium I need to increase rent by every year if I intend to maintian by household expenses. This does not account for the falling value of the rupee.
If I don't take 8-10 months of rent up front, I cannot possibly be sure about the financial worthiness of the tenant. What if the tenant moves in and refuses to pay rent from month 2? What will I do? Go to the police? Go to court? That will take 25 years and millions of rupees to resolve and I doubt Chief Sb will take suo moto notice of my tenant not paying his/her rent on time.
If I don't take rent up front, I have to visit the tenant every month because tenants can be irresponsible. They are either not home, are travelling, or simply say "promise I'll pay tomorrow" and then conveniently forget. I have been through that experience once and will never do it again. I don't have the time or energy to follow up every month for rental payments.
Typical rent is 40k - it takes me 2-3 weeks to close a client (and 80% of clients have more than 1 agent working for them so often my time gets wasted) and with my pipeline in full force I end up closing 1.5 deals a month. Taking 20k commission from landlord & tenant each makes me 60k a month in money. Of that, my I have to pay half either to my employer or to the primary agent who forwarded the lead to me. That means I end up with 30k every month in my pocket. That barely meets basic household expenses!