Out of Sight, Out of Mind: A look At NRI Owner-Local Tenant Dynamics

The relationship between a landlord (owner) and a tenant is a subject that hardly needs any introduction. Every owner faces challenges while screening and choosing tenants, and timely collection of rent, maintenance of the property, etc.

Apply the same relationship to an NRI who owns a  property in his homeland and a local tenant – and the challenges grow manifold! It is hard enough to buy a decent property in India if you are not accustomed to how the local market functions, and then trying to get good returns on your investments by renting out the property is a herculean task in itself.

The most obvious and the pivotal problem faced by an NRI property owner is the distance. Since it is not practical for the owner to visit his property regularly, the onus of managing the property, and the tenants, falls on the shoulders of friends and family. Of course, that ’s not the only hurdle. Let’s take a look at how the tenant-owner dynamics affect an NRI investor.

9 Ways The Tenant-Owner Dynamics Affects NRI Investors:

Owner-tenant dynamics are defined largely by trust – between the owner and the tenant, or between the owner and the person who has been assigned the responsibility of looking after the property. But there are certain scenarios which might adversely affect the dynamics, such as…

1. Getting the right tenants:

Being based outside India, it becomes extremely difficult for NRI owners to evaluate tenants and choose the right ones. The screening of tenants which involves the process of background checks and police verification is often facilitated by the broker. NRI owners are entirely dependant on this broker, and his family and friends to ensure that the process is carried out without any major hiccups.

2. Dealing with tenants:

Once the tenants have moved into the premises, it is impossible for the NRI owner to keep a close watch on how they are faring with the neighbours. The tenants could be too noisy, or too disruptive. Worse, they could be conducting illegal activities on the premises. In such situations, the management committee of the society might get in touch with the owner to take further action. The owner, in turn, can only approach his friend or family members to defuse the situation and take the necessary steps.

3. Managing the issues faced by tenants:

Not all tenants are bad. And often, they mean well and they take care of the property like the owner himself would. However, tenants also face problems with the premises such as plumbing issues, pests, or an urgent repair job needed. In such a case, the tenant too will find it hard to contact the owner to get the matters addressed.

4. Maintenance of property:

It is not possible for an NRI owner to make frequent visits to India, simply to check the condition of his property. It is possible that the tenants might breach the lease agreement and try to make structural changes to the premises. Again, there’s no proper way for the owner to inspect his property and ensure that there is no damage being done to the property.

A lease agreement usually contains a list of the furnishings and fixtures in the property to make it easier to keep tracks of damages.

5. Collection of rent:

Collection of rent on time is a major cause of worry for NRI owners. Normally, the rent is either paid online by the tenants, or through PDC (post-dated cheques) or by way of heavy deposit. In cases where the tenants have defaulted in making their monthly online payments, or if the cheques bounces or the tenant’s term for which the ‘heavy-deposit’ was paid is expiring, the NRI owner again needs someone to issue warnings, or levy penalties, and collect the rent.

6. Broker being partial to tenants:

There could be instances where the tenants could be related to, or friends of, the broker. In such situations, the broker might try to protect the tenants, despite the problems caused by them. Since the broker is the only link between the owner and the tenants, this could lead to a serious problem for the owner.

Again, it is pretty common for tenants to overstay their leased term, as the broker through some or the other means circumvent the processes and arrange for the tenants to stay, without the owner’s knowledge.

This possibility can also be true in case of an opportunist friend or family member.

7. The possibility of illegal activities:

Since the NRI owner is, for all obvious reasons ‘out of sight’ for the tenant, it is possible that the tenant may take advantage of this fact and use the premises for illegal activities. Again, for an NRI investor, this becomes next to impossible to know what’s going on.

8. Illegal letting and subletting:

Tenants might often sublet the premises, to take advantage of the owner being away, to cut down on their rental expenses.

Moreover, sometimes the friend or family member entrusted with the responsibility of managing the premises, might themselves let out the property without intimating the owner and keep all the rent with themselves.

9. Eviction of tenants:

Probably the toughest problem of all is when the tenants need to be evicted in situations where they breach the terms of the lease agreement may be by staying beyond the agreed lease period or by consistently defaulting on the rent payments, or by indulging in illegal activities on the premises.

It is generally believed that the laws governing tenancy in India tend to favour the tenant. For example, recently the Supreme Court of India ruled that a tenant cannot be evicted for five years (regardless of the length of the agreement) by his landlord so long as the rent is paid on time.

It is easy to see from the aforementioned points that, the dynamics of the owner-tenant relationship are pretty complex. And it is often quite tricky for an NRI to manage it all by himself. Hence, getting a good person or a company to manage your property is absolutely crucial.

Property management involves looking after the daily operations of a real estate investment. A property manager acts on behalf of the owner, to preserve the value of the property while generating income. A property manager can simplify the relationship between an NRI owner and a local tenant, while also taking care of everything else related to the upkeep and maintenance of the property.

All things considered, a property manager can take care of all the property related needs of  an NRI investor, right from screening and choosing the right tenants, and managing them, while ensuring timely collection of rent, maintaining the property, keeping the records, filing taxes, and making sure the property is fit for renting again once the previous tenant moves out. All the owner has to do is hand over the keys to a GOOD and RELIABLE property manager – Good and Reliable being the operative words!

If you are an NRI investor with properties in India and are looking for a property manager and peace of mind, make sure you get in touch with Homzhub, Your Trusted Property Custodian!