$15 billion in security deposits: India's tenants are their landlords' cheapest lenders

**Snigdha Sharma** (0:00)
Here is a question that I recently asked myself. What does my security deposit cost me?
The normal understanding is nothing, right? It is refundable, you get it back when you move out. I mean, that's the whole point of a deposit. But let's run the numbers. See, I rent a flat in Bangalore for 40,000 rupees a month, and I paid a 10-month deposit, which by the way is common in this city, that is 4 lakh rupees. Now, if that money sat in my own fixed deposit at today's rate, say around 6.5%, it would earn me about 26,000 rupees a year. Instead, it sits in my landlord's account, and whatever it earns, it earns for him.
26,000 rupees is more than half of my monthly rent. So every year that I rent my flat, I'm basically handing my landlord almost one extra month of rent. And that's the problem because nobody really thinks of the deposit as what it actually is, which is an interest-free loan from us to our landlords. Now, imagine how many people in India live as renters. A study by the property platform NoBroker, which was reported about by Business Standard this week, estimates that tenants across India's six biggest metros have handed landlords, and wait for this, 1.26 trillion rupees in security deposits. That is 1,26,000 crore rupees of tenant money. Now, if this was put in FDs, it would generate more than 8,000 crore rupees a year in interest. In Delhi NCR, for example, the study found about 42% of tenants did not get back their full deposit when the lease ended. Three in ten sorted auctions, around one in eight ended up fighting a dispute. And more than four in ten lenders in this market either lose a piece of their own money or have to fight to recover it. The scary part is how normalized all of this has become, like it's a part of renting. And here is what gets to me the most.
India regulates nearly everyone who holds other people's money, whether it is banks or NBFCs. Even when peer-to-peer lending apps grew into an industry of 11,000 crore rupees at their peak, the RBI stepped in with escrow rules and fines.
This security deposit pools is more than 11 times that size, and it has none of those protections. The landlord keeps our money in his own account, owes us nothing on it, and of course, there is no deadline for him to return it. So how did India's renters become the biggest lenders without even noticing?
Welcome to Daybreak, a business podcast from The Ken. I'm your host Snigdha Sharma, and I don't chase the news cycle. Instead, every day of the week, my colleague Rachel Varghese and I will come to you with one business story that's worth understanding and worth your time. Today is Friday, the 17th of July.

**Rachel Varghese** (3:17)
Hi, this is Rachel, and before we get to the rest of the episode, I have a quick scenario for you. Imagine that your main AI account, Jack GPT, Claude, Gemini, whatever you actually live in vanishes tomorrow. Your login, your history, subscription, everything, gone overnight. What happens to you? Is it nothing?
Or do you lose real work? Your prompts, your projects, a system that has learned exactly how you think.
Now, sit with that for a second. And if you don't know the answer, well, that is kind of the answer. The Ken has built a five-minute audit that scores how dependent you actually are on AI and it ends with a verdict. Most people come out more exposed than they would have guessed. The link is in the show notes. Now, on to the episode.

**Snigdha Sharma** (4:21)
The NoBroker study breaks down the 1.26 trillion rupees down by city. Mumbai holds the most, over 41,000 crore rupees. And then it's followed by Bangalore at 32,000 crore rupees. Delhi NCR holds around 24,000 crores, and Chennai more than 17,000 crores. Hyderabad and Pune are left with the remaining. Now, the most interesting number is hiding inside this ranking. You see, Mumbai has more renters than Bangalore, and its rents are also higher. Yet, its deposit pile is only about 30% bigger than Bangalore. And Bangalore's pile of security deposit is enormous for its size. And the reason for this is one that all of us renters in this city know. Deposits here commonly run from anywhere between 6 to 10 months of rent. In most other metro cities, it is about 1 to 2 months.
This gap makes you wonder what really is a deposit. A deposit is supposed to price risk, right? It is a chance when maybe a tenant destroys the flat or vanishes without paying rent. But if this was the case, the deposit would track the tenant, no?