• Imagine living in a spacious, well located, gated apartment for rent in Bangalore or Mumbai, but zero rent. Sounds too good to be true right?
• Welcome to the world of zero-rent lease apartments, also known as leasehold with heavy deposit, a growing trend among savvy tenants and NRI landlords in India. In a typical rental agreement, the tenant pays a monthly rent and a modest security deposit (ideally 2 to 5 months’ rent. The security deposit is usually a refundable caution money that the landlord withholds till vacancy to compensate for any damages done during the rental period.
• But in this alternative leasing model, tenants pay a large, one-time, and interest-free deposit (ideally 50 to 100 times of the monthly rental) without paying monthly rentals. This amount is refunded during vacating the apartment, minus any pre-decided or damage charges. These arrangements are usually made if it is a long-tenured rental.
• 1. Elements of Zero-Rental Lease
• • No monthly outgoing from tenants’ end, i.e., no monthly rent to be paid
• • Close to 50 to 100 times of monthly rental paid as an advance deposit
• • The aforementioned deposit is refundable at the end of lease term barring any damage charges

• The maintenance and utility bills are tenants’ responsibility

• There is no ownership transfer

2. Calculation of the rent

An apartment in Bangalore, say Indiranagar, is worth ₹2 crores.

The 2 scenarios mentioned above have 2 implications for both owner and tenant.

Owners’ POV:While the owner is not receiving the monthly rental income, ₹40 lakh in safe investment fetches interest on deposit for 5 years

Tenants’ POV: While ₹40 lakh is withheld for a long period, the tenant is saving the annual outgoing of ₹9 lakh, and getting the lumpsum back (considering no damage) by the time lease ends.

3. Why is this gaining popularity?

A. For tenants:

• No monthly rental drain: This helps with micro-level savings. Usually, a couple, individual, or family staying in rental apartments in Mumbai, Bangalore, or Pune have a designated excel cell allocated to “Rent”. This cell holds a high percentage share of their income (~30%). This arrangement eliminates this recurring expense off their shoulders.

• Long-term cost savings: Especially in metro cities, rentals are excruciatingly high. This arrangement, although blocking a hug amount for the stipulated period, helps in the long-term savings mission

• Stability: Rentalmarket in metro cities is as dynamic as outright purchase. The hassle of annual hikes, renegotiation, monthly hustle to pay the rent and sudden rule changes often create a chaotic situation. One-time deposit eliminates these uncertainties to a fair level. The only obstacle that might pose would be the refund of the deposit in case of any damage.

• Tax efficiency: For business-running tenants, avoiding rent-receipts proves to be beneficial

B. For landlords:

• Immediate lump-sum liquidity: A large sum of money is a lucrative investment starter. This sum can be utilized to earn interest income, as an interest-free capital, or other uses.
• No rent collection hassle: The stress of irregular payments, delays, and other issues can be parked in such a scenario. You’ve a secure sum, and that can be withheld with legal limits in case of any damage.
• Secure tenants: In such an arrangement, longer lock-ins results in usually less turnover. The hassle of a new tenant search, negotiation, background verification, etc. is a long, cumbersome process.
• Better property upkeep: With a large sum of money blocked with the landlord, tenants feel more invested in the space and take better care of it resulting in lesser damages.

4. Why and why not to get into this?
A. Pros:
• Rent-free life = lower monthly outflow
• Better negotiating power
• Stability in living conditions
• Great for long-term stays (3+ years)
B. Cons:
• High capital requirement (₹25–75 lakh)
• No interest earned on deposit
• Legal risks if the landlord refuses to refund
• Market risk: Property value or rent may fall
• Difficult exit if you relocate early
5. Legal & Financial Checklist
Since the zero-rental leasing has a huge sum involved, it is better to be informed about the legal and financial aspects.
✅ Sign a registered lease agreement (mandatory for terms >11 months)
✅ Include refund clause, lock-in period, and exit terms
✅ Clarify who handles repairs, maintenance, and taxes
✅ Take a detailed inventory & condition report
✅ Maintain proof of deposit transfer
6. Who should & who shouldn’t consider this?
This model works best for:
• NRIs or corporate executives needing long-term housing
• Startups or business owners looking to save on rent
• Tenants who want stability without frequent renewals
• Families or couples planning to stay in a city for 3+ years
You may want to skip this model if:
• You don’t have liquid funds to spare
• You expect to move within a year or two
• You want regular returns on your money
• You’re not confident about the landlord’s credibility
7. Is It Worth It? A Simple Test!

Here is a quick questionnaire that will help you
• Can I afford to lock ₹30–₹50 lakh for 3–5 years?
• Will I save more in rent than what I lose in interest?
• Do I trust the landlord to refund the full amount?
• Is the property location ideal for the long-term?
If the answer to most is “Yes”, this could be a great move to secure a residential rental with lucrative financial planning.
The “zero rent, heavy deposit” model is not a scam, it’s a legitimate financial alternative that works best when both parties are aligned on expectations and trust.
Like any financial decision, it’s about opportunity cost, risk appetite, and long-term goals. If you’re someone who values cash flow freedom, stable housing, and negotiating leverage, this model is worth exploring, just bring your lawyer and calculator along!

*Source: JLL Primary Research | Hindustan Times article dated 28th July 2025

Author: Sumedha Das