Think before shifting a house :Business Line

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Upset over yet another rent hike by your landlord? Thinking of moving into a new accommodation?

Don't rush into your decision. Take a holistic view of the financial implications. Here are some factors to consider.

Rent: Do a check with realty brokers and scan property Web sites. Assess if your landlord is trying to fleece you, or just demanding the going market rate for a house of similar specifications in a comparable locality.

If it's the latter, you may be better off staying put and re-negotiating. At least until you get a better deal.

Deposit: Take note of the opportunity cost on the higher deposit amount you may need to keep when you shift. If you currently keep three months of rent as deposit with your landlord, and a shift to another house means keeping twelve months of rent as deposit, do the math. Check whether the additional deposit, if kept in a fixed deposit with a bank, can earn you at least enough income to offset the rent hike in the existing house.

If yes, it may not make financial sense in shifting.

For instance, at current bank deposit rates of around 10 per cent, a house with three-month deposit and a monthly rent of Rs 15,000 may work out cheaper than one with a twelve-month deposit and a monthly rent of Rs 14,000.

Maintenance charge: Check whether amenities in the new house are comparable to that in your existing accommodation.

Also, check if the monthly maintenance charge in the new accommodation compares favourably with that in your existing house.

If it is substantially higher, it may more than offset any gains that you stand to make on the lower rent.

Hike clauses: Negotiate with your current landlord to keep the recently hiked rent amount constant for a longer period (say 2 to 3 years).

This may work out cheaper than moving into a new house at a lower rent but with an annual rent escalation clause.

Say the rent on your present accommodation has been increased from Rs 14,000 to Rs 15,000 a month. If this is kept the same for 3 years, it would work out cheaper than a house which has a rent of Rs 14,000 a month but with an annual increase of 10 per cent.

Brokerage: If you hire a broker to find you another accommodation, be ready to shell out around half-a-month to a month's rent as brokerage charges. Check whether this additional cost offsets the hike in rent you may have to pay if you continue to live in the same house.

Moving charges: Also, take into account the cost you will have to incur to pack up and move your stuff to the new place.

Location advantages: If the house you currently stay in is close to your place of work, you may be spending less on your daily commute.

A shift to a new house which is away from your office could increase your monthly fuel bill and offset the lower rental outgo.

The cost advantages of basic amenities such as uninterrupted water and power supply should also be taken into account.

Besides, consider the advantages which the present location offers in terms of access to good schools, hospitals and entertainment centres.

In a nutshell, rent, while an important factor in staying or moving out, should not be seen in isolation.