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What is a Rental Bond In India?

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Before engaging in a legal arrangement in India, tenants must pay a large security deposit to the landlord. These security deposits may range anywhere from two to twelve months. This sum serves as a guarantee by the tenant in favor of the landlord, protecting him from any future defaults by the renter. However, this creates difficulty for those who do not have sufficient money to cover such large security deposits.

 
What is a Rental Bond In India?

What are rental Bonds in India?

When a tenant signs up for a rental property, he or she is obliged to pay a rental bond also known as a security deposit. The bond is a type of financial security in the event that the lease agreement is broken, and it is used to cover any liabilities that the tenant may be responsible for at the conclusion of the tenancy, such as property damage, overdue utility consumption charges, or unpaid rent. Before the tenant moves into the rental, the tenant normally pays the bond to the landlord or property manager. It is not to be confused with the weekly rent and should not be considered a 'upfront' rental payment. The bond must be in the form of money and must be kept for the duration of the lease.

While rental bonds can be tailored to the needs of landlords and tenants, they typically include the following:

  • Rent that has not been paid
  • Rent that has not been paid for the remainder of the lock-in period
  • Utility bills that have not been paid
  • Property-related damages
  • Damages to the property

A rental bond is a type of security deposit paid at the beginning of a tenancy that benefits both the landlord and the tenant. It is deemed necessary for institutionalizing residential renting in India because it supports the principles of the Model Tenancy Act.

What is the benefit to the landlord?

The landlord is assured of a credit-verified and assessed renter because the surety firm undertakes extensive due diligence on the tenant before issuing the bond. He also has the option of setting the amount in the rental bond as a penalty sum to compensate for unforeseen losses.

 

What is the benefit to the tenant?

Tenants can also benefit from rental bonds. During the lock-in phase of the tenancy, the security deposit that a tenant gives to the landlord is kept safe. Instead of paying a large deposit, the renter simply has to pay a small guarantee fee to the landlord when a rental bond is in place. This is a big comfort, especially in light of the fact that the pandemic has devastated the financial resources of many families.

Read more about: bonds rental bond real estate
Story first published: Friday, July 30, 2021, 10:54 [IST]
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