Rental Values on the Rise in Mumbai
Mumbai may be facing stagnancy in property sales due to exorbitant property values. This has led to drop of property values in several micro markets. At best, property values have remained stagnant in most localities. However, on the other hand Mumbai is witnessing rising rental values. A mismatch between the demand and supply for rental housing is quoted as the main reason for this increase in rental values.
Rental values go up
It can be said that rental values across tier-I cities across the country are going up. For example, in the last 12 months, rental values in certain areas of Delhi NCR went up to 20 per cent and in Bangalore they went up to 14 per cent. Several areas in Chennai saw rental values going up by up to 13 per cent. Mumbai too is not far behind. Powai witnessed a rise in rental values by about 5 per cent. Several areas in Navi Mumbai such as Vashi and Airoli witnessed rental values going up by at least 15 per cent.
Reasons for increasing rental values
The main reason for increasing rental values in spite of stagnant and falling property prices is the limited supply of homes. Most market watchers believe that there is a mismatch between the supply of homes available for rent and the demand by people migrating to Mumbai. Though there are several under-construction homes around the city, there are not many ready-to-occupy homes available for tenants. Several existing homes too are not available for renting out as the procedures involved in forming a contract and terminating it are tedious and act as barriers.
Another reason is that property markets is driven by speculations. The economic situation in the country and high property prices have turned away many speculators making the Mumbai property market dull. However, the rental market is not driven by speculation. Property owners most times adjust rental values as per demand. Rental properties also get occupied quickly.
Improving infrastructure around the city and increasing number of business parks have contributed to the rental values. For example, the effect of the emergence of Bandra-Kurla Complex and the Mumbai monorail is evident in Mumbai. Chembur witnessed a hike of 7 per cent in the last quarter of 2013 compared to the third quarter of the same year owing to the monorail. Andheri, Malad and Bandra saw an appreciation of 15-20 per cent in rental values in one year due to the IT crowd.
With more projects nearing completion this year, and limited project launches across Mumbai in the past few months, one can expect a reduction in the gap between supply and demand for rental houses. It cannot be yet predicted how the rental values will be affected in the next few quarters. However, for the next few months, the rental values can be expected to continue to grow.
