Rentals crash in top metros

New Delhi/Bangalore: The rents and the demand for rented homes has halved and the rents are down by almost 25 per cent in several popular residential localities within Bangalore, Delhi and Mumbai as India Inc tightens housing budgets in its battle against economic slowdown.

In the city of Mumbai, rentals in NCPA Apartments located at Nariman Point, marquee buildings such as the sea-facing Haveli on Malabar Hill, and Maker Towers situated at Cuffe Parade, where rentals used to range between Rs 5.5 lakh and Rs 12 lakh a month, are now down by almost 30 per cent.

In Delhi’s Chanakyapuri, West End, Vasant Vihar, Shanti Niketan and farmhouses in Chattarpur and West End Greens, the rentals within the last one year have dropped by almost 25 per cent.

In the Silicon Valley of India – Bangalore, rentals in apartment buildings in posh neighbourhoods like Epsilon in Yemlur and Prestige Exotica on Cunningham Road are also down by almost 35 per cent this fiscal. According to commission agents, rents in Epsilon range between Rs. 7 lakh to Rs 10 lakh. Corporate earnings have been subdued and no new expansions have been announced within the recent past. Rentals for single homes in Bangalore are down by 40 per cent, while rents within gated communities have fallen by 20 per cent. Brokers and commission agents in Bangalore are observing a steady decline in queries for rental accommodations which has almost halved in the last three months.

This has been the slowest growth within the past two years. This reflects the lack lustre growth performance of the country’s real estate sector. With the slow down in GDP growth to a decade low of roughly 5 per cent in 2012-13 from a peak of 9.6 per cent in 2006-07, costs are being pared by companies on all counts, hiring at all levels included. As per a recent survey conducted by the Planning Commission, India has lost about 5 million jobs between 2005 and 2010.

Where company accommodation is considered people always desire the best and so costs do not play as the ultimate deciding factor. In the current business scenario businesses prefer a local resident of Mumbai for positions available in Mumbai and a Delhi resident for Delhi offices. Approximately 15 to 20 per cent of cost to company (CTC) is constituted by rentals. The ball does not stop at the respective courts of companies, freshly hired or new joinees too are seeking for cheaper accommodations and rentals, despite being entitled or eligible to company-rented homes due to the rising inflation and its ill affects on their pockets. Purchasing of homes has almost come to a naught due to the drooping sentiment which has added to the woes of the real estate sector which has already been witnessing a downfall.

Especially in the case of Mumbai, where property brokers in areas such as Colaba, Cuffe Parade and Marine Drive are struggling to rent out apartments which traditionally have been the most sought after by senior company executives. In accordance to the observations made by the top industry professionals, few landlords still demand the moon, however people are not willing to pay. With numerous businesses relocating from the old central business districts of Cuffe Parade and Nariman Point to Bandra Kurla Complex and Lower Parel, the charm of living in the sundry posh localities of south Mumbai is fading. Various transactions in Mumbai are taking place almost 5 to 10 per cent lower than rentals of the last fiscal.

Companies have dropped their relocation budget by at least 20 per cent. Companies are also shortening the tenure of leases and asking landlords to lower security deposits while increasing the flexibility. In the past 3-4 months, business in Delhi and Gurgaon have come down by roughly 50 per cent. Hiring is being kept at a minimal by companies, additionally companies are also cutting down on perks, such as rentals.

South Delhi’s inventories alone have witnessed an increment three times within the last three years. There aren’t enough expats, premium clients and top executives to fill these homes. In the March 2013 quarter, India Inc’s revenues grew just 4.8% over the same period last year.