If you let a home in Bengaluru, January took something off you and handed you something back, and almost nobody has done the arithmetic on either.
The two-month deposit cap removed a float you had been holding for years. [VERIFY] That is a real cost and this note does not pretend otherwise.
But it also removed the single largest barrier to somebody taking your flat. Whether you are better or worse off depends on a number you can work out in about four minutes.
What the float was actually worth
Take a home let at ₹1,00,000 a month. Under the old norm you held ten months’ deposit, ₹10 lakh, for the length of the tenancy. Under the cap you hold two, or ₹2 lakh. [VERIFY] What the Act changed, in full.
You are ₹8 lakh down on float.
The question is what that ₹8 lakh was earning. Parked somewhere sensible at around 7%, it produced roughly ₹56,000 a year.
So the cap costs you a little under five per cent of your rent, expressed as forgone return. Not nothing. Also not the catastrophe it is being described as in some quarters.
Two ways to make it back, and one of them is better
The obvious one: raise the rent by about five per cent. On ₹1,00,000 that is ₹5,000 a month, which more than covers ₹4,667 of forgone return. You are whole.
There is a constraint to know about. Rent increases are now once every twelve months, with ninety days’ written notice. [VERIFY] You can still charge what the market bears, since the Act does not cap rent, but you cannot revisit it mid-year. So the number you set at the start has to carry the year.
The better one, and the one nobody is talking about: let the flat faster.
A vacant month on a ₹1,00,000 home costs you ₹1,00,000, plus painting and re-listing. Against that, ₹4,667 a month of forgone float is a small number.
If the cap shortens your vacancy by about three weeks per tenancy, it has already paid for itself.
And it plausibly does. A tenant who needed ₹12.5 lakh on day one to take your flat now needs about ₹4.5 lakh. That is not a marginal difference. It is the difference between a shortlist of people who happen to have ten lakh liquid and a shortlist of everyone who can afford the rent.
The pool got deeper at exactly your end of the market
Here is the part worth sitting with. The deposit barrier was always most punishing at the top of the market, because it scaled with the rent.
Ten months was ₹4 lakh. A serious sum, and one a lot of people could assemble.
Ten months was ₹10 lakh. That excluded people who could comfortably pay the rent every month.
Fifteen lakh on day one. A very short list of tenants, and most of them corporate.
So the cap has done the most to widen demand precisely where the homes are most expensive and the vacancies most costly. If you let at the premium end, you are the landlord it helps most.
That is also why the argument that good tenants will now be harder to find has it backwards. A large deposit was never a filter for a good tenant. It was a filter for a liquid one, and the two are not the same thing.
It is worth reading what your tenant is reading about the same change. Ten months’ deposit isn’t always ten months’ deposit.
What to do about the risk you were covering
The fair objection to all of this: the deposit was not only float. It was cover. Ten months meant that if a tenant stopped paying or damaged the home, you were protected while you sorted it out.
That cover has genuinely reduced, and the answer is to replace it with things that work better than a large deposit did anyway.
- A signed inventory with condition noted and dated photographs. This is what an exit deduction is argued from, and most landlords don’t have one.
- A registered agreement, not a notarised one. The District Rent Authority can act on the first. [VERIFY]
- A tenant profile you have actually checked: employment, previous tenancy, why they left.
- A shorter notice period than you might once have accepted, so a bad tenancy ends faster.
- Deductions defined in writing: what may be taken, on what basis, with what evidence.
A ten-month deposit protected you by holding money. These protect you by making the position clear before anything goes wrong, which is cheaper for everyone and works considerably better in front of an authority. What can be deducted, and what gets argued anyway.
The number to work out this week
Four minutes, on the back of something:
- 01 Your deposit before and now. The difference is your lost float.
- 02 Multiply by 7%, divide by twelve. That is the monthly cost.
- 03 Divide by your monthly rent. That is the percentage you need to recover.
- 04 Compare it to one month of vacancy. In almost every case, the vacancy is the larger number.
If step four surprises you, that is the finding. Most landlords have been optimising against the wrong risk: protecting the deposit while paying for empty months.
If you let a home in one of the nine neighbourhoods we work in and want the version of this with your own figures in it, send us the rent and the current deposit. It takes ten minutes and we will not follow it with a pitch.
