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An Article on Rental Housing in Modern Gurgaon
Housing for All? At What COST?
1. This article is being written as a brief for mainly new house hirers
(probable Tenants), who are generally outsiders, and seek to rent a new house in modern Gurgaon. As this article has mention of few budget
prices, hence it is important to mention that this article is written in Nov 16.
2. About Gurgaon. History of Industrial City Gurgaon could be traced to year 1971 when Maruti factory and MDI Gurgaon were
conceived. Maruti could never take off till 1986 and MDI came into top 10 Management Institutes in 90s. Post global impacting reforms by Honble
ex PM Manmohan Singhji, modern Gurgaon came into being in 1992 onwards. Other factors, inter-alia, which helped climb up this city were:
a. NH8. b. Increased ancillary units/ MSME of Maruti-Suzuki. c. Global impacting reforms and need for space for MNC (service
sector) near Delhi. d. Proximity to Domestic and International Airports.
e. Formation of SEZ (eg Reliance.).
3. ‘Industrial’ Gurgaon existed from 70s to 90s on the west side of NH-8, it is the ‘MNC’ Gurgaon (can be called ‘modern’ Gurgaon) on the east
side NH-8, which brought impacting change in the pricing of local housing/ flats, as also brought in mid to high end professionals from other cities. Most of these professionals, like modern Gurgaon companies, are
from Services sector. Modern Gurgaon was well landscaped by DLF through its development of Phase 1 to 5. Other part of modern Gurgaon,
in sector form, was landscaped by other Builders and Societies. DLF Phase 1 and 2 came in early 90s while other phases crawled in later.
4. Booming Rental Scene. With the increased globalisation,
unshackling of econmy through the years 2002 to 2008, housing demand was out stripping the supply. Many of the professionals used to commute from Delhi/ Noida, even in the absence of Metro (MMT: Multi-Modal
Transport). Pain of standing/ waiting at Toll was endurable vis-a-vis the pleasure of salary earned. Slowly, the rental demand crossed the inflexion
point wherein buying the house (more so against tax savings) and disposing at the end of job tenure/ transfer looked profitable and wise.
Another wisdom that propelled the ‘Buy’ approach was that rental had reached almost same value as EMI to be paid and hence made it easier
and more sense to pay EMI (than rent) with disposable income in hand,
claim tax deduction, which gave more money to self. This led to upbeat
mode of apartment construction (societies/ builders etc) in modern Gurgaon. Propensity to ‘buy’ new flat was so high that another modern Gurgaon came up further to Industrial Gurgaon called Dwarka
Expressway. This was to meet the housing demand of Industrial work force of Reliance SEZ and other such huge projects. In year 2010, author
wanted to buy a flat somewhere in modern Gurgaon or on Dwarka Expressway Gurgaon, but he observed the highly cartelised network of
property dealers, using IT networking tools (email groups or Apps). Prices in equally good live-able cities like Noida and Chandigarh were very
competitive (almost half), which actually are better planned. 5. High end townships like Laburnum, Park Plaza etc occupied high end
rates. Many Japnese and Korean who had come down for starting of greenfield and brownfield projects occupied such high end housing. All
was OK with them till 2012, when they also felt the heat of rising rents.
6. Downturn. Post 2010, global economic downturn deepened, and as a result many BPOs businesses were shut. Reliance SEZ did not
take off, the land was returned around 2012 and manufacturing sector was hit. Promised Dwarka Expressway continued to be in court wrangling. Industrial jobs did show marginal decline from 2014 onwards, while jobs
in MNC Gurgaon (services sector) stayed. New housing construction in modern Gurgaon started showing weakness. Property prices and Housing
rents did fall in 2013-15 pan-India by 20-30%, including next door Delhi but same did not happen in Gurgaon. However, Gurgaon Circle rate for
buying property/ stamp duty registering etc have fallen down this year (2016) by around 12 to 20%. On the contrary, Housing rents
have started rising high on the websites and by verbal demand of agents/ brokers, which are the 2 main gateways to access for knowing availability. It should be noted that there has been little or no High end or Mid Level
executives jobs in Gurgaon, who use these housing. In order to stay in these properties, one has to afford monthly rent of Rs 25K, Car exp of 7-
10K, schooling for (2) kids for 25K and maybe living expenditure of 25K to 40K. A job of Rs 1L can (after TDS!!!) can only sustain this and there
are no such job creations by tons in last 2-3 yrs in this region. While the new housing (apartments type) which has come on the road is around 25
to 40K. Jobs of delivery boys, office girls, beauty shops employees etc have gained marginally, which pay an employee in the region of 25K to 50K. Such employees prefer sharing/ PG systems.
Why did Rents not Fall?
7. Cartelisation and manipulation of prices can be seen in India in
many sectors. Industrial Cartelisation happens in the form of Policy advocacy which leads to (Price) Licensing (for eg in medicine), Price
discrimination (price of cool drink/ water bottle on bus stop vs airport/ Malls), Predatory Pricing etc. Traders do hoard and cartelise for price
jacking for the motive of Profiteering, due to which many time Center &
State Govt enforce ESSMA. During the last 1-2 yrs there has been considerable supply into the market, thanks to Consumer/ Citizen activism and Judicial cannons to Builders/ Proprietor. In the same period,
there has been downsizing of medium and senior level executives. During 2014-15, Rent prices did show of holding steady rather than fall. This
behaviour was akin to Price for new property which showed a marked decline (around 30%) pan India in 2014-2016 but did not slack off in
Gurgaon. Prices of properties and rentals continued to hold it fort. During the same period, Maruti factory’s expansion plan showed a trend towards
Sanand in Gujrat and decreasing the production line in Gurgaon. Enforcement of pollution norms did pinch the already depressed apparel industry. Hardly there were any new production added to the city
elsewhere.
8. There could be many reasons for holding on the rentals rather than slacking off. Following are the factors which attribute to the current eco
system of rentals/ prices:- a. Eco System. As is prevalent in general India, there is
hardly any regulated system or fairplay of forces of Supply-Demand for Housing Supply-Rentals-Prices etc. Stakeholders like Owner, Buyer, Tenant, Property Agent, Website etc play a guess game in
the absence of disclosed data. More so, outsiders are blinded to the prevalent eco system and eco system is set for win in absence of
fair disclosure/ fair play of Supply-Demand.
b. Websites. Many sites with namesakes like 9999across, magictricks etc are used by the outsiders to gather first hand info.
Generally these kinds of sites are heavily subscribed by property agents/ dealers who set rental of similar houses as price of recently rented place + Rs 2K to 4K, on these sites. Outsider/ probable
tenant/ seeker searches these sites and assumes the given price to be threshold/ benchmark. When he enquires same from the agents
or through his friends (who also use same sites), seeker obtains similar jacked up results. This sets the market, by design, to Up
spiral/ upward price roll. Further, websites by design, tend to set a price range of Rs 5K for search facility. For a common citizen or a
mid-level executive, 5K margin in rent is fairly high, but maybe for Hi-level executive it maybe a ‘no’ or ‘hardly’ a difference. In field work I inquired few citizens/ tenants/ probable tenants, as to, do
they set a margin of Rs1K or 0.5K? Many of the ‘urban tenants’ did not know that they could set a lower band/ margin also. Some did
say a band of 2K to 3K was tried by them. Around 80-90% tenant/ house seekers use the pre-set margin of 5K. Due to this large
margin setting, agents manipulate the price threshold and try to strike the deal at higher end of band set, but it is Ok with them if
they get new tenant lower by 1K. This new discovered price sets the
new threshold for society, which is born out of innocence of
technology usage by probable tenant. Lesson – 1. Always use price band which is lowest possible suited
to you. 2. Always set benchmark price as 2K lower than being
offered by the websites. This is for the fact that displayed price are meant to sent into higher spin roll.
My efforts to deduce data from these websites, as to how many tenants dropped off from a Society/ Flat soon after taking over, or,
migration pattern of same (email ID)/ similar customer to different townships/ society etc could be obtained. This drew a naught, though some (3) agents mentioned few names of societies/ flats
which they won’t offer to anybody. Unfortunately, for outsiders , such flats get offered at same value proposition as are others.
Lesson- There lies a scope to deduce more, from consumer/ customer (buyer/ probable tenant) point of view,
to disclose more information by websites in form of a yearly report as to what is going and what is being neglected and
why. Currently, websites promote Owners/ Sellers and merely interface the Buyer/ Seeker (Probable Tenant). Maybe a different IT eco system will answer the call in few
days/ months. Such a system should be neutral and fair to all stake holders viz Seller, Buyer, Owner, Tenant etc.
c. Agents/ Property Dealers. They are the most
important part of the housing buy-sell or rent eco system, but, I shall not be surprised if there data and services/ taxes are not
captured by the Govt system. It could be very possible that large number (maybe not all) agents/ property dealer are not registered under the Govt rules.
i. Entry to most of the townships/ societies is banned to
outsiders, unless they are guests of residents, which is well verified. However, so called property dealer (how they are
verified is a mystery) have access to data of the owners desiring of out-letting/ sub-letting/ selling etc. They also have
access to email IDs of all such RWAs and are able to enter with due (email) permission. How they get to know further data is a mystery as most of the RWAs do not keep probable/
listed flats for out-letting/ selling. ii. Out vs In Brokers. It has also been observed that
outsider Agents/ property dealer are more aggressive/ manipulative in prices rather than the person staying in the
RWA as a resident and also doing such business. This is because an outsider agent/ broker is a professional whose
livelihood is this, while inside resident knows well what is going rate, is able to rent out house quickly to genuine
persons, maintains good relations with fellow RWA beings. An
outsider agent/ broker is not bothered if house is not outlet for 1-2 months. However, such inside person data is not much available in the market as it is not a big business for him and
one gets to know of him through connection. There could be a chance that such an inside living agent/ broker could be
pressurised by owners to get more rent/ rate, in that case other market forces should decide and not a recommendatory
note. iii. Not Buy, but Rent. Property market (Buy-Sell) has
been in the downswing, nationwide, for last 4 years now. This has led local Govt to lower the circle rate in Gurgaon. Due to absence of any Buy-Sell transactions, many of the agents/
brokers could not get the hefty sum on the table. One of the other ways to earn from this business was to earn well from
rental business. This also augurs well with many owners, who generally are not the end users but investors, to rent out the
property for a while rather than indulge in lower price or distress sale. Commercial rental business is also on a bad
swing. One can witness that most of the big malls on Sohna Road are empty on 1st floor upwards. Maintenance charges on such malls are upwards of Rs10K from small size shop to a big
space. Most of the shops are common modernised, big size Kiryana shops. Hardly new MNC offices are occupying the
office. The zone left for earning income was from rentals of houses/ flats. Despite increased supply of houses on Golf
Course extension road, rentals have gone up on almost all websites. How did this happen? This is no Rocket Science.
Websites are heavily subscribed by agents/ brokers. They set the new threshold and make play blind to innocent outsider/ house seeker/ probable tenant. Clearly this is far distant from
fair play or Supply-Demand. iv. Tele Talk. Many seekers (probable tenants), when they
communicate to agents/ brokers etc on Tele/ Mbl, the agents/ brokers build up a quick background data to know the paying
potential of the client. They ask clearly which company are you working, what is your designation, from which city are
you coming and by what time do require the house. Some off these data reveal the paying potential power of client and the urgency, which allows the agents/ brokers to set the new
threshold and not Supply-Demand. v. New Apartments. Many of the new townships/
societies are from good brands like Tata (Raisana), Ireo (Uptown) etc. When these houses (around 400 to 600) came
into market in late 2014 or early 2015, the smart agents mobilised high paying tenants from DLFs prized buildings like
Park Place, Summit etc (where rental was climbing upwards of Rs 65K) to these new modern upmarket townships at a rent
of Rs 45K or so. The author cross checked on ground such
movement of expat clients and learnt that around 40% residents of Japan/ Korean had migrated from these apartments. This set the new threshold for these high end
new townships. Had these high end clients not moved in, the new offered rental prices would have been in the region of
25K. Many of the new (other than Tata, Ireo) integrated townships like BPTP Park Prime, Ansals Essenica, Pioneer,
Heritage, Tulips etc have an occupancy rate not more than 40 to 60%. These accommodations were offered a start price of
20K to 24K in the start of year 2016. Bestech Spa, which has huge rooms (unlike other modern townships in the same area) had started with rental of 20K (for 4BHK) in year Jan
2015. There is likely to be increased availability of such modern housing on the Golf Course Extension Road in the
year 2017, which is covered later under what should be its fair rent and what you could seek.
d. Owners. In my field work, one thing I found was that
Owners like Tenants, were also oblivious to facts. Many a times, new tenant dosnt get to meet them as some other caretaker gets the paper work done. As the website and agents/ brokers were first
point of contact with the flat seekers, the Owners were silent and blind to the system. Owners were happy till they get a good
tenant (generally salaried class, from outside) and if gent could get them more rent than the previous time the flat was rented out. Till
the housing Demand was outstripping the Supply, till 2010 or 2012, it was OK with Owners, Agents/ brokers. After 2013-14, rentals held
themselves due to new supply. From 2016, the Supply is outstripping the demand, thus, only market manipulation is keeping the rent high. As a result, many of the new modern (good branded
townships/ societies are 40% empty. Also, as few clients are moving away from old (high rent) societies to new modern
societies/ townships (with affordable rent), these old societies are also showing an increase in non-occupancy rate. Owners also
presume that it is better to wait for 1 or 2 months rather to offer at 1K or 2K less than previous time rentals. However, a simple
business calculation will indicate that a month’s loss of proposed rental is more than income generated by rental of 1K or 2K less. Maybe, a feeling of not to hurt market rate (which actually is
manipulated) also guides them. In this process, for sure, agent/ broker is a winner at the cost of Owner. For agent, higher rent gets
more money in one time transaction, but for Owner, not only one month revenue goes off, he pays maintenance charge from his
pocket which agent/ broker doesn’t have to be part off. Earlier, in non-multi-storeyed structures, there used to be nil maintenance.
Lesson - Over reliance on broker/ agents who dosnt get the pinch as Owners loss is not correct. Owners could
examine a mechanism to deduct the loss on equitable basis
from agent/broker account and self. e. Govt as Silent Perpetrator and Loser. At first
thoughts, I had planned not to write this sub paragraph. With the enormity of loss to Govt/ exchequers account, I thought that it
should be written. Real estate is a big business and it is anybody’s guess as to how did & how much money came in and go. I shall
confine my small point to rentals and that to housing (flats/ floors/ kothis accommodation/ PG etc.
i. Correct Person!!??. As I mentioned earlier, in my field work, many agents/ brokers/ real estate dealers I met
did not have a licensed documents. Few agents showed me allegiance letter to some Real Estate/ Property Dealers
association and few showed me their Self proprietary papers but NONE could show me licensed practitioner of this
business. I would not assume that all agent/ brokers/ dealers are incorrect. Further, all those practicing in the market,
accept cash or self-cheques, thereby making the disclosure of their income little difficult. In many cases I found that house owner is Mr A but rent contract is being signed with Ms B and
signed cheques payment taken in the same of Ms B accordingly. This was clearly to avoid income-tax on Mr A (the
Owner who is already a IT payee) while income generated through house rentals goes to Ms B who is a non-IT payee. I
realised that, on an average if rental is 25K, and if 1000 such transactions take place per month in pan-Gurgaon, then
volume of transactions (from Owner+ Tenant) would be Rs25Kx1000= 25L per month. It shall be fair to assume that MCG-HUDA/ State or Centre Govt maynot be getting 10% of
such revenues in the form of Service Tax and later as IT of the firm. Further, yearly revenue @25K for 11 months loads
upto =Rs25K x 11 months x 1 lac accommodations pan Gurgaon. It would be fair to assume that not more than 10%
of such revenue must be pouring in to IT coffers of the nation. Lesson - Do try to meet the owner and take copy of
his/ her PAN Card for records. Always sign the Contract and Cheques in the name of Owner and not in somebody else’s name.
ii IT Governance. Gurgaon is blessed with present
Collector like Mr TL Satyprakash and past Commissioners like Mr P Mittal, Mr SS Virk. However, like pan India, no Govt has
thought of creating a simple website or App which could provide similar factual information as being given by the
current open domain sites. Had this simple tool been devised by the Govt and had all transactions been facilitated through
such a site, Govt could have been captured, such a huge data
on income/ revenue generation and factual market rates would have been discovered - with direct relationship of Owner-Seller-Buyer-probable Tenant. Personally, I am against
Govt intervention into every business opportunity, but then somebody has got to address the ‘broken window fallacy’.
Lesson - Need of some Govt led approach cannot be undermined. Compulsory licenses to few persons with
adequate disclosures/ payments etc and mass handling IT approach in which availability of accommodation
(any type from owners only, no agents/ brokers), transaction and rating (details by residents/ tenants only) need to be brought online. Gurgaon can lead
India in this and am sure other lead cities like Delhi, Mumbai, Kolkotta, Chennai, Bengaluru, Hyderabad etc
will follow this. Gurgaon city, like many other cities, welcomes all in its
townships/ societies flats and dosn’t discriminates by religion or caste or food preferences.
9. What is fair rent? This question is very intriguing and reminds me of debate as to what is a ‘Fair Wage’. In Business sense, fair rent can
be self determined by open and free markets. But for sure, open and free markets rarely exists. Price manipulation and discrimination skew the
whole philosophy and disturbs the subtle balance in which both the major players viz the Seller/ Owner and Buyer/ Tenant are disturbed by a
3rd party called agent/broker. It was all hunky-dory-love-story till Owner and agent/broker were on the same side – winning side. Things go bad
when Owner instead of earning revenue becomes a paying party for the maintenance, the story of which agent/ broker is not part of. No tenant likes a broker/agent who obtains higher cost premises for him/her while
another market discovery indicates lower housing. Sometimes cartelisation or association of friendship amongst agents/brokers does set
wrong or manipulated thresholds on the websites. In all fairness, this question cannot be answered till we have a Govt led IT mass tool in which
Owner/ Seller can get face to face with Buyer/ Tenant, atleast for the rental market. There exits a rough benchmark on what could be the
accommodation rent. This is provided by Govt (Center and State) in the form of HRA. Though Govt HRA is slightly lower than prevailing rates in all major cities, but this is a good indication from ‘rent supply’ side.
10. New Flats/ Promising Housings. Many of the probable
tenants would be interested in this paragraph more. The availability is going to increase and most of these flats have been booked by persons
who may not be staying in (end users) or are working outsides for some years to come etc. These flats are also smaller than flats on the west side
of Golf Course extension road. Flats on the Dwarka expressway are relatively bigger in size for same type (2BHK or 3BHK). My friends have
been trying to offer his 3 BHK in New Town height/ DLF/ Sector 90 and
another colleague her 4 BHK Sare homes in sector 91 for 15K but no takers are available. Rates in these Sectors townships have been manipulated due to high end townships, but then probable tenant should
take a call to reside where. After all beauty of being tenant is this, choose which township to stay for how many years, without disposal baggage.
