Bengaluru Steals the Show

Residential rental demand has soared in most cities ever since offices and schools reopened after the 3rd Covid-19 wave in 2022, especially in the past one year .Particularly , the country’s IT/ITeS capital Bengaluru  has seen skyrocketing rental values. Anarock’s analysis of monthly rents across prominent areas of the top 7 cities finds that Bengaluru’s Thanisandra Main Road and Marathahalli-ORR saw residential rental values zoom up by 24% each between Q1 2022 and Q1 2023.

Average monthly rentals for a standard 2BHK home of 1,000 sq. ft. at Thanisandra Main Road increased from INR 21,000/month in Q1 2022 to INR 26,000/month in 2023. At Marathahalli-ORR, average monthly rentals increased from INR 22,500/month last year to INR 28,000/month in Q1 2023.Interestingly, the next two hotspots were also in Bengaluru. Whitefield – another prominent IT/ITeS destination – witnessed the 2nd-best rental value growth of 21% in this period, against all prominent localities in the top 7 cities of India.In Whitefield, the average rents stood at INR 21,900/month in Q1 2022 and in Q1 2023, had reached INR 26,500/month.The third spot was occupied by Bengaluru’s Sarjapur Road, which recorded rental value growth of 20% between first quarter of 2022 and 2023. Here, the average rentals were INR 22,500/month in Q1 2022 and INR 27,000/month in Q1 2023.

Prashant Thakur , Senior Director & head Research, Anarock Group anticipates residential rental values in the IT capital’s prominent markets to rise further by anywhere between 5-12% in 2023, depending on the location, property, builder-type and other aspects. He adds that  with limited supply and high demand, the rents could easily rise beyond 12%.

Source: ANAROCK Research 

Top Rental Markets – City-wise

Besides the prominent localities in Bengaluru, other cities also recorded notable rental values growth:

• Pune’s three standout markets with high rental growth between Q1 2022 and Q1 2023 are Hinjewadi, Baner and Wagholi, which witnessed rental value growth of 19%, 15% and 13%, respectively
• In Chennai, the top 3 markets to witness high rental values growth are Pallavaram, Perambur and Oragadam, with rents in this period growing by 16%, 10% and 11% respectively
• In NCR, the top 3 markets were Sohna Road in Gurugram (rental values increased by 13%), Sector-150 in Noida (15% growth) and Dwarka in Delhi with a rental value growth of 10%
• In MMR, the top 3 markets for rental value growth were Chembur, Ghodbunder Road (Thane) and Mulund, which saw 17%, 14% and 14% growth, respectively
• Kolkata’s top 3 markets with high rental value growth between Q1 2022 and Q1 2023 were EM Bypass, Joka and Rajarhat, where rents rose by 13%, 11% and 10%, respectively
• In Hyderabad, the top 3 markets were HITECH City and Kondapur, which saw rental values increase by 12% each, and Gachibowli with 11% growth

Residential rental yield (the annual rate of return an investor can earn from capital invested in a property) had for long stagnated in India. The national average stood at 3% for the last few years pre-pandemic. However, things began to change with rental demand spiking up post the pandemic in 2022. Among the top 7 cities, Bengaluru has the highest rental yield of 4.1% as of Q1 2023-end, followed by Mumbai with 3.9%. Pre-Covid, the rental yield in Bengaluru was at 3.6% – the highest back then, as well.

Rental demand outstripped supply to push residental rents, According to Magicbricks Rental Housing Index (January-March 2023) , rental demand surged 7.3% QoQ and 3.3% YoY.  While 2BHKs continued to be the most preferred rental properties, the demand for 3 BHKs grew by almost 6% Q0Q, indicating an increasing preference for spacious homes. The pan-India rental housing availability declined 5.7% QoQ and 17.8% YoY . According to Sudhir Pai, CEO, Magicbricks, the rental housing market is  demonstrating buoyant revival and macroeconomic trends affirm that there will be sustained growth trajectory for the rental housing market.