Boss Over Rent
Staying on rent, it’s time for a masterstroke, buy it off – Read on to know whether renting-to-own policy will be a success in India
TEXT : SREYASI MAITY
With the dream of homeownership for numerous Millennials in obligation, the request of leasing to claim sounds like an achievable dream. Rather than throwing away thousands in lease whereas battling to save for a down installment, your lease cash adds to the price of your own home. So how does rent to own work?
What is Rent-to-Own?
Rent-to-Own, an alternative route to homeownership which is additionally known as a lease-purchase is a contract between the tenant and the seller to purchase a house at a future closing date. This may be at any place from one to three years’ time after the contract is signed.
Rent-to-Own Homes: Top Picks to Know
- Rent-to-own can benefit homebuyers who have bad credit scores or insufficient funds for a down payment.
- The potential buyer moves into the house right away. The agreement defines – 1-3 years by which the potential buyer can buy the house from the seller as long as certain conditions are matched.
- Understanding the contract is vital. The potential buyer pays the seller one-time non-refundable option money and they give the right to buy the house in the future which usually ranges from 2.5 and 7% of the purchase price.
- The contract will clarify obligations. If the seller chooses to cover the cost, the buyer still needs the rental insurance policy.
- The potential buyer usually pays the monthly rent that many times is partially applied to the purchase price that lets the buyer build equity – the tenant may be asked to build HOA fees (Homeowners Association Fee), property taxes and insurance as well handle repairs and maintenance.
- If the potential buyer chooses to buy the house to apply for financing and pace the seller inflow, if not the option expires and all the money paid is forfeited. If the buyer is legally obligated to buy but can’t, legal proceedings begin.
Rohit Poddar, Managing Director, Poddar Housing and Development Ltd explained about two types of agreements.
Standard agreement: In this agreement, the tenant can lease the property for a certain period and can have all the rights on property but the occupant is not obliged to buy the property after the expiration of the agreement. The tenant can choose to walk away once the contract runs out without any liability to buy or pay rent.
Lease-purchase contract: In this agreement, the tenant is liable to buy the property after the decided leasing period runs out. The lessee is bound to buy the property whether the lessee wants to buy or not.
Rent-to-Own Scheme: Gains
Ashok Mohanani, Chairman, EKTA World elaborated on the benefits of the scheme, “The scheme can be the most profitable resolution for tenants as well as millennials who wish to own a home. The idea of the scheme is to offer a home with affordable rentals and provide ample time for the tenants to save funds and perk up their financial scores. Buyers have always enjoyed the idea of getting complete access to experience, hence the tenants take pleasure in friendly and society living experience. So renting a property before buying, helps a home buyer to know the pros and cons of the property as well as the surrounding.”
Future of Indian Home Ownership?
Rohit Poddar, Managing Director, Poddar Housing and Development Ltd felt “The proposed ‘Rent-to-own’ concept is an ambitious element of the National Urban Rental Housing Policy (NURHP) but it still isn’t a widespread concept amongst the middle and lower middle-income group in the country. This concept is more common in the western countries amongst tenants who aspire to buy a property while using the property as a tenant. After paying a certain percentage of the price of a property as rent, the property is registered under the tenant’s name.”
Ashok Mohanani, Chairman, EKTA World added “On the whole, the scheme is likely to boost affordability for residential homes in metro cities like as Mumbai, Delhi, Kolkata, Hyderabad and Pune where more job scenarios affect in comparatively higher invasion each year as compared to tier-II cities. We hope this scheme to be proved effective for both the parties – the tenant and the landlord. Besides, the rent-to-own scheme, the government is also considering to make available properties such as hostels, student housing, senior living to hearten more developments in the rolling residential demand in metro cities.”
Rent-to-own scheme is mostly to boost rental housing especially for migrants and also for others to realize their dream to own the house. Per the last census, around 27% of the Indian population lives in rental houses and in a bid to add strength to the rental housing amongst migrants, the Central government has introduced the concept of ‘Rent-to-Own’ scheme.