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An Explainer: Security Deposit

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Security deposit is the amount of money paid to prove the intent to commit to a deal.

PropGuide Explains Security Deposit

When you rent a house, you pay a certain amount of money as security deposit to the landlord. The security deposit is given as a proof of your intent to rent the house. It is also to ensure that the landlord does not lose much from the transaction even if you vacate the house without intimating the landlord in advance. Security deposit, also, ensures that you do not damage the property in any form. The security deposit you pay when you rent a house might be equivalent to a month’s rent, or more, depending on the case. In some cases, security deposit is refundable. In some cases, it is not.

In some cities like Bengaluru, security deposit can even be as high as up to 10 months’ rent. In Chennai, it is typically six months. A Chennai court recently ruled that landlords could collect only one month’s rent as security deposit. Landlords, however, argue that it is difficult to evict a tenant when he defaults on rent payment and that the deposit is their only security in such cases or in case of any damages to the property.

Security deposit is also paid to sellers and lenders as a proof of one’s intent to buy or pay back.

Check out PropGuide's comprehensive guide to real estate terms here.

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