Dear Team, Included below is a short note and FAQ on the Rent Back arrangement. The salient features of the Rent Back Arrangement:
1. Rent Back Arrangement is being provided by Square Care – a property management service provider which is part of the Square Yards Group.
2. Square Care is the fastest emerging PMS provider in Delhi NCR region 3. Square Care will enter into a 3 year contract with the buyer for managing his property. 4. Square Care will pay the following amount per month for the first 12 months of the contract. Studio (unfurnished) Studio (furnished) Suites (furnished)
Rs. 8,000 p.m. Rs. 10,000 p.m. Rs. 13,000 p.m.
5. The contract period starts from the date of possession is received by the buyer. 6. In addition, if the property is put on rent during the period of the contract then the buyer will receive 90% of the rent amount and Square Care will retain 10% of the rent as their service fee. 7. If the property is not put on rent for a period of 3 continuous months including during the first 12 months, then the buyer will have an option to terminate the contract on 1 month notice. The termination of the contract (incl. during the first 12 months) will not have any impact on the rent back being paid monthly for the first 12 months. FAQs:
1. What is the rationale for Square Care to provide such a lucrative deal? This is like a 0% interest scheme which car manufacturers provide in collaboration with a bank. The car manufacturer benefits with higher sales and banks benefit with more business. And they both share the costs amongst them. Similarly, here the Rent Back scheme increases the attractiveness of the property thereby helping the developer register more sales and it benefits Square Care by helping them secure a large number of property management contracts. Hence they both have agreed to share the costs of this lucrative deal.
2. What happens at the end of 12 months post possession? The assured rent back shall stop after the end of 12 months period, however the property owner will continue to earn 90% of the actual rent income being generated by the property.
3. Why should the property owner be paying 10% of the rent amount after the first 12 months when he/she is not earning any assured rent back? Even if the property owner would have transacted for the rent through a local broker, he/she would have to pay 1 to 1.5 months rental as brokerage which works out to 8.5% to 13% all of which is payable upfront. However here is to be paid for only the months where the actual rent is being received. In addition, Square Care will manage all the maintenance and upkeep related tasks of the property on behalf of the property owner without any additional management fees (only actuals costs to be paid). Hence it gives a completely hassle free experience of owning and earning from the property.
4. What happens if the property owner do not want to put the property on rent but occupy it himself? The property owner can give a one month notice to terminate the contract for their own personal occupancy. As a goodwill gesture, the monthly rent back amount will still be paid for the first 12 months from the possession.
5. Will there be TDS deduction on the rent back amount? TDS deduction will depend on the applicable regulations at the time of the payment of Rent Back amount. As per the provisions currently in force, TDS will be deducted for the rent back amount.