Rental Values on the Rise Pan-India

The Indian property market is in an interesting situation with a mix of falling property values in some markets and rising property values in the other. For example, property values in Mumbai and Delhi-NCR are at best stagnant whereas they are on a constant rise in cities such as Bangalore and Chennai. However, irrespective of property values, rental values across the country are on the rise.

Rental values across markets go up

A recent report from Commonfloor.com identified some of the important cities and micro markets that did well last year in terms of rental activity compared to 2012. For example, Borivali, Powai and Bhayander performed well in Mumbai, whereas HBR Layout, KR Puram and Yeshwanthpur in Bangalore performed well. Similarly, Vasundhara Enclave, Janakpuri and Laxmi Nagar performed well in Delhi whereas Porur, Ashok Nagar and Red Hills performed well in Chennai.

All these localities witnessed a significant increase of rental values within a year. For example, localities in Delhi witnessed an increase up to 21 per cent whereas in Bangalore, they witnessed an increase up to 15 per cent. Interestingly, several areas in Mumbai, where property values are at best stagnant, witnessed increase in rental values up to 18 per cent.

Reasons for increasing rentals

There are several reasons cited for the increase of rental values across the country. Demand and supply mismatch is, however, the biggest reason cited for this. For example, several projects in Delhi-NCR are still under construction and not available for renting for the people migrating into the region. Several existing houses in many markets too are unavailable for the tenants as the procedures for creating a contract as well as terminating it are tedious. These act as barriers for renting out a property.

Another reason is that rental houses generally have high demand and get occupied soon. For instance, property listings in Bangalore have almost 50 per cent as rental properties. Most of them get occupied within a month. As such, there is continuous demand for rental properties.

Increasing IT crowd in various cities is cited as another reason for increasing rental values. Bangalore is undoubtedly the silicon city of the country. However, there are several IT parks cropping up in Mumbai and Delhi. IT SEZs attract a huge crowd from other cities. One of the main reasons for increase in rental values in Powai is due to the presence of the IT crowd working in the nearby IT parks. The average rental value per sq. ft. in 2012 was about Rs 38, while it increased to about Rs 41 per sq. ft. in 2013, marking an increase of five per cent. Apart from the growing IT crowd, improving infrastructure across different areas attracts demand from more tenants.

With all these supporting factors, rental values across the country can only be expected to go up for a few more quarters.