Realty way to make flat profit

Brokers take apartments on lease, rent them out for cool margins

For Nithin (name changed), a real estate broker, it was an opportunity hard to let go of.

Leasing out 21 newly constructed flats, in an upcoming residential area in Kodigehalli, at Rs 1.76 lakh per month would help him make a cool profit of not less than Rs 80,000 to 90,000 per month. This is the fourth building he has taken on lease in the past three years.

A simple calculation made by Nithin ensures that he can ‘sub-let’ (rent out) the 21 flats to individual families or persons at Rs 12,000 to Rs 13,000 per month. Unlike the conventional real estate agent who needs to keep in mind the ‘requirements’ of the building owner, Nithin can ‘sub-let’ the flats to anyone, without ascertaining their caste or creed; married or single; working or studying; vegetarian or non-vegetarian.

As per this new trend, a few big real estate brokers in the City are taking buildings on lease from small-time developers or land owners who have constructed apartments on their land and ‘sub-letting’ them.

An investor or a real estate agent enters into an agreement with the building owner or the builder for a fixed period of time. Once the amount is settled, the investor or the agent will hold complete rights over the apartments and he can sub-let them for that period.

“Once the land owner or the builder agrees for the lease period, he is given a fixed income every month with the profit pocketed by the agent. This is a simple business model which I have devised. It is a risk which I take as there is no surety that all the flats can be sub-let,” said Nithin. According to him, most big-time real estate agents try to lease these residential buildings in new and upcoming areas located closer to the IT industry.

“This ensures that there is more probability for the investor to sub-let the apartments,” said Nithin.

While for Nithin it may be an investment worth making, as the building maintenance can be ‘ignored’ and there is no barrier of entertaining ‘unwanted’ lessees, for smaller real estate brokers it may become a huge liability.

“If people start leasing buildings and sub-letting them, it will destroy the real estate
market. Agencies and brokers will suffer a huge loss and people will start losing confidence in the builders due to non-maintenance of the property,” said Karim, a real estate developer.

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