Covid-19 has done one thing which people did not expect. Almost all services or assets have been re-priced. So salaries are being re-negotiated, interest rates have gone down, and many people are negotiating rents. What are the options that you have as an employee, or a lender or a land-lord?
As an employee: There is a good chance that companies may downsize their business and hire people to work from remote locations. If clerical work can be shifted from Mumbai to say Nashik, Baroda or Coimbatore, it is obvious that they will save some money.
The salaries will be lower, and the company will save money on daily commute, rent (they will shift to a smaller office), will need lesser support staff, etc.
As an employee you should accept the offer while keeping your options open—and look at newer opportunities in a post-covid19 world.
What if some American company wants you to work remotely from Coimbatore? So do not take a hasty ego-driven decision of not taking a lesser salary.
The time to change jobs is when YOU have the option, not when your boss is calling you an option!
What happens if you have kept money in a bank fixed deposit at 10% and now comes up for renewal? Well, if you do not know how to invest in equity markets or even debt mutual funds, you will have to accept the 6% fixed deposit interest that the bank gives you. Here, you have been re-negotiated for a lower rate.
If you are a land-lord and your client’s agreement comes up for discussion, what choice do you really have?
With more and more people leaving Tier1 and Tier 2 cities, rents are not likely to go up in a hurry. So if the tenant offers you Rs 18,000 per month instead of Rs 23,000 (which he or the previous tenant was paying), you will have to accept the lower offer.
Assume you have to pay Rs 2,500 per month as society maintenance charges, keeping the house locked for 4 months is going to cost you Rs 10,000! Apart from this, the Rs 18,000 per month that you did not get is a loss too.
So you should accept the offer at 18k.
Make sure that you put a 10 per cent increase clause - so that you can use that to increase the rent after one year.
However, if the rents do increase and you get offers for Rs 23,000 (pre-covid19 rates), you can (should?) change the tenant.
As a tenant, your ability to get a better rate from your landlord depends on the following -
a) how well your landlord knows you
b) your social image and standing - ego
c) your landlord’s waiting patience and your landlords knowledge about your situation
d) if your landlord has 12 properties giving him rent and he is paying EMI for some of the flats given out on hire.
Largely speaking, do not take a 10 year decision based on a 10 month problem. We will over-come the problem—I am sure we will learn to live with the problem of Covid-19. We have lived long enough with the problem of the pandemic. By February 2021 we may have learnt to live with the virus. It will kill fewer people, and we will have learnt to use the right protocols.
PV subramanyam
writes at www.subramoney.com and has authored the best seller ‘Retire Rich - Invest C 40 a day’