Bengaluru: The mismatch between demand and supply has led to a sharp increase in home rental rates, adding to the cost of living in most big Indian cities, according to a new report. This is a major concern as the urban population balloons with more people moving to cities for employment and modern living standards.
According to the Magicbricks Rental Index, the average rental rates increased by 7.4 percent in the July-September 2024 quarter across 13 major Indian cities, which marked a 17.1 percent uptick year-on-year.
“Between July and September 2024, average rents increased 7.4 percent quarter-on-quarter (QoQ) across 13 major Indian cities to INR 35.8 per square foot per month—the highest increase in the last two years,” according to the report.
At the top of the list, Chennai saw the greatest increase in July-September with rent prices rising a whopping 22.2 percent, followed by Delhi (11.4 percent), Thane (10.9 percent), Navi Mumbai (9.9 percent), and Hyderabad (9.8 percent). The report attributed the increase in cities like Chennai, Delhi, Thane, Bengaluru, and Navi Mumbai to “growing employment opportunities, educational facilities, and ongoing urbanisation”.
In the year-on-year (y-o-y) change in rental prices, Chennai is still at the top with a 37.4 percent increase from the same period last year, but the next highest increase was seen in Navi Mumbai (28.7 percent), Hyderabad (28.2 percent), Greater Noida (26.2 percent), and Bengaluru (22.9 percent).
A closer look at the demand and supply changes offers a closer insight into the movement of rental prices. For instance, the data showed, while Chennai registered negative growth in demand of 0.3 percent quarter-on-quarter (q-o-q), the supply reduced even further, dropping a massive 17.4 percent q-o-q.
The contrast between demand and supply is even more pronounced in the y-o-y category which shows that demand rose by 13.5 percent while supply collapsed by 39.5 percent.
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As WFH ends, demand rises
The data is consistent with change in the work model as pandemic-era protocols come to an end. Most big corporations have now almost completely done away with the COVID-19-induced work-from-home (WFH) model, forcing employees back into offices.
Many employees who had returned to their hometowns, while enjoying city-level salaries and higher savings, are also forced to make their return to offices in bigger cities.
For instance, in Bengaluru, the data trend shows growing demand for apartments and other accommodations. Bengaluru rental prices were up by 9.1 percent q-o-q.
“Bengaluru’s rental market experienced a decline in both demand and supply growth on a quarterly and yearly basis. Despite this, rental prices saw a notable increase in JAS’24,” the report noted.
While the capital city of Karnataka registered a negative growth in demand of 2.8 percent quarter-on-quarter (q-o-q), the supply reduced even further, dropping 5.8 percent q-o-q.
“The city’s thriving IT industry, expanding startup ecosystem, the rising adoption of hybrid models, and strong connectivity via major roads like NICE roads and Kanakapura continue to attract renters,” the report further added.
‘Renters have no option but to pay’
With home buying increasingly unaffordable in most Indian cities, the only option left for much of the young workforce is to rent homes.
Additionally, with competition between states to get investments and large corporations to set up shop, rapid urbanisation and the promise of better education and employment opportunities are driving more people into cities, adding to the surging demand.
Additionally, barring Greater Noida, Gurugram and Noida, all other major Indian cities have seen the supply of rental homes fall y-o-y, the report showed.
Najib Aga, a Bengaluru-based real estate consultant, told ThePrint that a two-bedroom apartment that cost Rs 35,000 in monthly rent a year ago, is now going at Rs 45,000 in central Bengaluru. The asking price for three bedrooms in the central business district is now in the range of Rs 70,000, up from around Rs 55,000 earlier.
“It is the same people but they do not have a choice but to pay. People come from outside and they have to match the asking price. Homeowners are not coming down in their asking price as it is a benefit they are unwilling to forgo,” said Aga.
Homeowners in Bengaluru, as well as in other parts of the country, are unwilling to give out their properties at lower rents fearing it would lower the base price.
Growing power of homeowners
The competition has become so intense that the expectations for potential renters have also grown. Homeowners are going as far as scrutinising their LinkedIn profiles and expecting them to pitch themselves using presentations.
This has also allowed space for homeowners to increase rents without much prior notice or keeping in mind proportionality and make demands for advance payments of up to 10 months.
The power of homeowners has grown so much that Bengaluru-based brokers also say that they can now filter out renters by ‘veg only’, deny accommodation outright to those who are unmarried, invade the privacy of their tenants, and even hold back repayment of advances citing false damages—especially against non-locals—with little to no repercussions.
Experts say that the offers incentivising companies and employees to move to smaller cities have not yielded the desired results because living in a big city has an aspirational component as well.
‘Market may be stabilising’
However, some experts also say that these trends need to be viewed in light of the pandemic-related upheaval in the housing market.
ANAROCK, a real-estate consultancy firm, said that more completed units have seen rents stabilise in cities like Bengaluru compared to the previous two post-pandemic years.
Dr Prashant Thakur, regional director and head of research at the group, told ThePrint that while there has been a slight increase in the average rental values in the third quarter (Q3) of 2024 compared to the end of 2023, in most of the micro markets, the percentage change from 2023 to Q3 2024 is lower than the increases observed between 2021 and 2022, and 2022 and 2023.
In Bengaluru, for instance, while overall y-o-y rental values were up, demand fell by 9.6 percent compared to supply, which fell by a lower 5.8 percent.
“This stabilisation suggests a healthier and more balanced market. It indicates that the rapid rental growth seen in the immediate post-pandemic period is gradually easing, potentially reflecting a return to more sustainable rental trends,” Thakur said.
(Edited by Sanya Mathur)