Rental housing in India is predominantly an urban phenomenon. This is largely due to the concentration of large numbers of migrant population in urban clusters. It enables migrants to continuously shift places with changing job locations, manage their household finances, locate proximity to worksites, and remit more money back to their homes. The NCR of Delhi is one of those few urbanized states that have a higher percentage of households (28%) residing in rental accommodation, over and above the national urban average (27%).
Rental housing market in Delhi is characterized by co-existence of several sub-markets. Low-cost rental housing is mostly available in the slums/Jhuggi-Jhopri clusters, followed by the urban villages, unauthorized colonies and planned colonies.
It is interesting to explore the functioning of the low-end rental housing market in urban villages, because while people in the slums or JJ colonies rarely have formal rental contracts, urban villages are the markets where formalisation first started (followed by unauthorised colonies and planned colonies). The monthly rental values in this particular segment (urban villages) range between INR 5000-15,000, and provides rental accommodation to students, working professionals, and low-income labourers in the city.
Navigating rental housing in urban villages: The rise of the broker
Urban villages play a significant role in providing low-cost rental housing in Delhi. Such areas are demarcated as ‘Lal Dora’ in the planning document, where planning norms are usually relaxed. It allows the local residents to build different types of housing by maximizing the available horizontal and vertical space. The housing typology includes semi-permanent housing, permanent multi-story pucca houses, and pacca rooms with shared toilets and metered water.
The majority of low-income households in urban India reside in rental accommodation without having a formal rental agreement. However, Delhi’s urban villages present a contrasting story where there is a constant urge for the formalization of rental agreement. This has led to the emergence of the broker class, which not only bridges the communication gap between landlords and tenants, but also acts as ‘proxy-owners’ in the presence/absence of landlords.
Thus, while landlords would previously rent out their property directly to tenants, nowadays they prefer to avail a broker’s assistance to find potential tenants and mediate the rent setting process. Every few metres within an area, there is an office of ‘property dealers’ who deal in rentals. Apart from the property dealers, there are other individuals such as owners of kirana (grocery) stores and eateries, security guards also working as part-time brokers.
The broker normally charges 15 days’ to one month’s rent (approximately INR 2,500-15,000) as brokerage from the tenants. Their key role is to keep the vacancy information available for rent inside the village area and bridge the gap between the tenants and landlords.
Once a room becomes vacant, landlords inform a few local brokers to find suitable tenants. Then the information of vacant houses to be rented is disseminated among local brokers through ‘word of mouth’. Brokers who are able to strike a better deal (i.e., bring tenants who will be staying for a longer duration and have a stable source of income) first clinch the deal.
Some of the brokers also have close ties with the landowners; they take up the entire responsibility of replacing tenants when someone leaves the room. However, this is more prevalent in the case of absentee landlords. Apart from bringing in new tenants, brokers also take care of the property in some cases.
A broker in Khirki village told us “If a tenant creates any trouble after the house has been rented out, for example, if they fight with each other, do not pay rents on time, refuse to vacate the room despite termination of the rental contract, or run away without paying rent, then it becomes the broker’s responsibility to handle these”. This makes brokers something of a ‘chowkidar’ of a rented property, a fact repeatedly mentioned by several brokers.
Why do landowners want brokers?
The emergence of brokers in urban villages is influenced by twin processes that happen at the city scale – an increase in the number of crimes and the mounting need for registration of rental agreements.
Delhi’s criminal landscape has driven landlords to rent out their property through brokers to reduce the risk of crime by tenants on the rented property. A broker operating in Munirka village told us, “There have been many ‘hadsa’ (crime) that happened in the past — one tenant murdered another, accidental death in the rental accommodation, tenants killed landlords over disputes on rent, tenants hid in their room after thievery or kidnapping, etc. All these incidents are reason enough to inject fear into the landlord’s mind and make them reluctant to let out their property on rent without brokers.”
He also confirmed that if some ‘hadsa’ (crime) happens after renting out the property through a broker, it becomes the broker’s responsibility to handle the situation.
The other factor that has contributed to the emergence of brokers in urban villages is the increasing requirement of documentation. A broker in Khirki village told us, “Earlier very few people went for registration of the rental agreements. But as more people started to formalize their rental agreements, it has increased the burden on landlords, which they now pass on to us. Now it is our job to facilitate police verification of tenants and registration of rental agreements.”
The increasing need for documentation is also indirectly enforced by the Delhi High Court judgment, which makes police verification mandatory for renting out a residential property. As per the judgment, violation of such a rule by the landlords would be considered a punishable offense under section 188 IPC (i.e., one month of imprisonment or a penalty of INR 200, or both). Therefore, the landlords prefer to engage with brokers to reduce the burden of documentation.
Does the emergence of brokers create a financial burden on tenants?
While the active presence of brokers in the rental market has mutually benefited landlords and brokers, it actually creates an economic burden on the potential tenants.
A tenant residing in Khirki village and working in the Saket mall as security guard pointed out that “There are many websites where rooms are available without engaging with the brokers, but those are above my budget. I preferred to rent properties in urban villages, because of the relatively lower rental costs in these areas, but the involvement of brokers has now increased the amount of one-time investment (security deposit, one month rent and brokerage combined) required to get a room here.”
This also indirectly prevents tenants from frequently changing rooms in the rental market, because every time they are required to pay the brokerage fee.
The presence of brokers also reduces the scope of negotiation between landlords and tenants at the time of renting. In an interview, a tenant residing in Munirka village and working in a shop told us that “while renting out properties, brokers are trying to strike attractive deals with landlords due to competition among the brokers. However, it inflated the rental value and reduced the scope of negotiation between landlords and tenants.”
The emergence of brokers in urban villages has thus become something of a double-edged sword. On one hand, they smoothen the renting out process by acting as ‘proxy owners’ and mediators. On the other hand, they increase the economic burden on tenants, who have to pay the brokerage and also lose their bargaining power, affecting access to low cost housing in the process.