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Renting or buying a fully/semi furnished home? Do remember to factor in the money that you will have to pay for electricity

By on August 27, 2015

In today’s fast paced life, everyone is looking for quick and easy solutions. In past, and to a large extent even now, people buy their own appliances and they take them along with them wherever they go. But today there is an increasing trend where more and more people are looking for fully or semi furnished homes to rent and even to buy. The trend is especially picking up in metros and big cities, as more and more people are investing in properties to give them on rent, and more and more builders are trying to create a differentiation for their properties by marketing them as luxury or premium apartments. But how many people think that there is a cost associated with living in these apartments and using the pre-installed appliances that comes every month in the form of electricity bill.

A classic principal agent problem

A principal agent problem is one where 2 parties are involved in an act involving economics and one party takes decision on behalf of another. We all know that efficient appliances are expensive to buy but they provide returns in form of electricity savings. But when a person who has invested in a flat or a house and is trying to put it on rent thinks of furnishing it, s/he tries to think of minimizing the investments and maximizing the returns. And because the tenant pays the electricity bills, the owner has very less motivation for investing in a higher value product that can increase his investments and minimize returns. Unless a person is motivated enough to protect the environment, the person might not be ready to invest and the cost of his actions will come upon the tenant.

Similar is the case with the builders. Many builders (especially in metros like Mumbai) are trying to come up with furnished apartments with pre-installed appliances. The most common is the fully air-conditioned apartment where all they do is install an air conditioner in each of the room. So if it is a 3 BHK, there will be four ACs installed in four rooms including one hall and three bedrooms. The additional cost is not more than a lakh of rupees. Here, they again have very less motivation to install efficient appliances until the buyers or consumers want it. The problem compounds when the same flats are being purchased as investments, as then again the investors would want the builders to install cheaper appliances. In places like Mumbai, builders are making luxury apartment complexes with air-conditioned lobbies and it is observed that most of such air-conditioned lobbies are equipped with in-efficient air conditioners. Even the pumps and lifts installed in the buildings have inefficient motors that cause their electricity bills of the group housing societies which in turn is paid by residents themselves to skyrocket.

What can consumers do?

The need of the time is to be more alert while buying a flat or taking a fully furnished house on rent. One should not discount the price of electricity (which is rising every day) before making a decision on taking a place. High electricity bills can increase cost of living in the house significantly and the consumer has to make sure that it is in control. A few things that a person should always take care of:

  • Make sure that the appliances available in the house are efficient appliances: 5 star rated appliances, efficient bulbs and tubelights, etc.
  • If possible make sure that the house has good insulation in case there are air conditioners installed. Air leakage can increase electricity bills.
  • Make sure that builder has installed efficient appliance while buying a house in a luxury apartment complex, else negotiate for the price of a house without appliances.
  • Make sure that the appliances are serviced and maintained properly. Poorly maintained and old appliances consume a lot of electricity.
  • If pumps are installed, make sure that they are efficient. In-efficient pumps increase electricity bills significantly. It is difficult to check the same before buying a flat in apartment complexes and thus it is important that the housing society checks and replaces the same as soon as it is formed. In efficient pumps can cause huge burden for housing societies, as they are a major component of electricity bills in any society.

The principal agent problem is a difficult one to solve but can be mitigated by more awareness. If consumers are aware and they demand certain standards, then the market for high standard products will improve. So next time if you are looking to buy or rent a fully furnished house, please ask for efficient appliances, as it will help you and will also help the nation save electricity. Keep reading Bijli Bachao!

About the Author:
Abhishek Jain is an Alumnus of IIT Bombay with almost 10 years of experience in corporate before starting Bijli Bachao in 2012. His passion for solving problems moved him towards Energy Sector and he is keen to learn about customer behavior towards Energy and find ways to influence the same towards Sustainability. .