Bengaluru Takes the Lead: Rental Market Heats Up with Highest Yield of 4.45%

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Bengaluru Takes the Lead: Rental Market Heats Up with Highest Yield of 4.45%

Team Finance Saathi

30/Apr/2024

Key Points:

Bengaluru leads India's rental market surge with a remarkable 4.45% yield increase.
Nationwide, rental yields and values show significant upticks, attributed to post-pandemic demand.
Concerns rise over cost-of-living inflation for tenants amidst rapid rental price jumps.

India's rental market is experiencing a remarkable surge, led by the tech hub of Bengaluru, as revealed by Anarock's latest data.

Since the onset of the pandemic, there has been a noticeable uptick in rental yields and values, with Bengaluru emerging as the frontrunner with an impressive 4.45% increase in rental yield during the first quarter of 2024. This surge represents a substantial 24% jump from pre-pandemic levels in 2019, underlining the resilience of the real estate sector amidst challenging times.

Post-Pandemic Demand Driving Growth

The surge in rental yields and values can be largely attributed to the strong post-pandemic demand for rentals, particularly in cities with a robust IT presence like Bengaluru, Mumbai, and Gurugram. Across the nation, cities such as Pune, Noida, Delhi, Navi Mumbai, and Thane have all witnessed improvements in rental yields compared to pre-pandemic times. This positive trend extends to rental values as well, with significant year-on-year growth exceeding 30% in India's top cities during 2023, followed by continued momentum in the first quarter of 2024.

Concerns Arise Over Cost-of-Living Inflation

While this surge in rental yields and values spells good news for landlords, it raises concerns about cost-of-living inflation for tenants. The rapid increase in residential rents, averaging between 4-9% in the first quarter of 2024, surpasses the typical annual increase of 5-10%. This trend could potentially strain the budgets of tenants, especially in cities where the cost of living is already high.

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City Spotlight: Bengaluru Leads the Charge

Bengaluru, often hailed as India's Silicon Valley, is at the forefront of the rental market surge. Prominent localities like Sarjapur Road and Whitefield have witnessed substantial growth in average monthly rents for a standard 2 BHK flat, with an impressive 8% increase between the fourth quarter of 2023 and the first quarter of 2024. Similar trends are observed in other key cities, albeit to a lesser extent. For instance, Noida's Sector 150 saw a 9% rise in average rents, while Mumbai's Chembur and Mulund witnessed 4% growth each, and Kolkata's Rajarhat saw a 3% increase.

Expectations for Future Growth

Overall, the rental inflation trend shows no immediate signs of slowing down. Expectations are high for further acceleration in the next few quarters, as rental activity typically remains high in the first two quarters of the fiscal year. However, stakeholders will need to closely monitor the market dynamics to ensure a balance between the interests of landlords and tenants, especially concerning affordability and accessibility to housing.

Conclusion

The surge in India's rental market, led by cities like Bengaluru, highlights the resilience and adaptability of the real estate sector amidst evolving economic landscapes. While landlords benefit from increasing rental yields and values, concerns over cost-of-living inflation for tenants underscore the need for a balanced approach to housing policies and market regulations. As the rental market continues to evolve, stakeholders must collaborate to ensure sustainable growth that benefits both landlords and tenants alike.

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Bengaluru Takes the Lead: Rental Market Heats Up with Highest Yield of 4.45%

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